(Reuters) -India plans to cut personal income tax rates to boost middle-class spending power and seeks to increase private investment to strengthen growth, the 2025-26 budget showed on Saturday.
The world’s fifth-largest economy is expected to post its slowest growth in four years next year amid frail urban demand and weak private investment, while stubbornly high food inflation has dented disposable incomes.
Following are reactions from industry executives, experts, fund managers and economists:
CHRISTIAN DE GUZMAN, SENIOR VICE PRESIDENT, MOODY’S RATINGS
“Announced tax relief measures have constrained the growth of revenue receipts, which will rise at its slowest pace since 2022-23; as such, falling expenditure as a share of GDP has borne the brunt of the projected narrowing of the fiscal deficit even as the emphasis on capital expenditure has been sustained.”
“Although the Union government remains on track to meet its near-term policy goals, we do not expect a sufficient improvement in the debt burden, or the proportion of the budget earmarked for debt servicing to change our broader assessment that India’s fiscal strength will remain weaker than most of its investment-grade peers.”
KAMAL BALI, PRESIDENT & CEO, VOLVO GROUP IN INDIA
“I feel around 25-30 million personal taxpayers will save around 100,000 rupees ($1,155.59) annually. It will boost discretionary capital spends like buying a vehicle. Taxpayers will have better repaying capacity for EMIs.”
PREETHA REDDY, EXECUTIVE VICE CHAIRPERSON, APOLLO HOSPITALS
“With the announcement of Day Care Cancer Centres in all district hospitals over the next three years, India is making a decisive move to increase access to quality cancer care, especially in underserved regions.”
“The exemption of 36 life-saving cancer drugs from customs duty further reduces financial strain on patients, reinforcing affordability and better health outcomes.”
GIRISH WAGH, EXECUTIVE DIRECTOR, TATA MOTORS
“The removal of basic customs duties on key materials for battery manufacturing is a strategic move to boost domestic EV production, foster a sustainable ecosystem, and drive India’s transition to a greener economy.”
“As infrastructure projects gain momentum and consumption picks up, improved roads, connectivity, and logistics will undoubtedly drive increased demand for freight and commercial transport solutions driven by both domestic demand and broader economic recovery.”
ANGSHU MALLICK, MD & CEO, ADANI WILMAR
“The Union Budget 2025 reflects a strong commitment to strengthening India’s agricultural ecosystem, with a clear focus on enhancing productivity, promoting crop diversification, and improving post-harvest infrastructure.”
“The focus on tax reliefs and measures aimed at increasing disposable incomes, especially for the middle class, is a positive move that will strengthen purchasing power and drive demand for quality food products.”
“Support for oilseed cultivation and food processing will enhance domestic production, while tax reforms and rural development efforts are expected to drive consumer demand.”
SANJIV PURI, CHAIRMAN & MD, ITC AND PRESIDENT, CONFEDERATION OF INDIAN INDUSTRIES, TO ET NOW
“What has been very welcome is the significant relief provided to the middle class. Consumption is about 60% of the economy, so providing a boost to that was much required at this time… Overall it benefits all the stakeholders in the economy and a very positive budget.”
KRISHNA PRASAD CHIGURUPATI, CHAIRMAN & MD, GRANULES INDIA
“Exempting 36 life-saving pharmaceuticals from basic customs duty and adding six essential medicines under a concessional 5% duty will significantly enhance access to critical therapies.”
“Extending full exemption and concessional tariffs to bulk drugs used in their manufacturing will further improve affordability and availability.”
AMIT PAITHANKAR, CEO, WAAREE ENERGIES
“The announcement of the National Manufacturing Mission, along with enhanced PLI (production linked incentive) schemes and tariff rationalization for critical minerals will support the rapid growth of the entire renewable energy ecosystem.”
“The inclusion of lithium-ion battery manufacturing incentives and duty exemptions on key raw materials like cobalt and lithium will accelerate India’s emergence as a global hub for energy storage solutions, furthering the EV and solar industries.”
ANISH SHAH, MAHINDRA AND MAHINDRA MD & CEO TO ET NOW
“The demand stimulus is clearly a positive in the short run. More importantly, the long-term positives are around ease of doing business, the focus on capital goods imports, the inverted duty structure that is being addressed.”
“These are things that will make it easier for us to create a better manufacturing setup in India, to lower the cost of manufacturing.”
GAURAV DUA, SENIOR VICE PRESIDENT AND HEAD OF CAPITAL MARKET STRATEGY AT MIRAE ASSET SHAREKHAN
“The negative surprise has come from the shift of focus on government capex in infrastructure development. The government is falling short of meeting the central government allocation of 11 trillion rupees in FY2024-2025. And the allocation for next year is only 11 trillion rupees with a reduction in allocation on the defence sector.”
“Clearly, the measures taken to boost consumption and provide relief to weaker sections of the society has left little headroom with the government for capex allocation.”
DHRUV AGARWALA, GROUP CEO, HOUSING.COM & PROPTIGER.COM
“The Union Budget 2025 introduces transformative measures aimed at strengthening the real estate sector and making homeownership more accessible. The significant tax relief for the middle class is a pivotal step.
“By easing the tax burden and enhancing disposable income, this move is set to boost household consumption, savings, and investments, thereby fuelling housing demand and overall economic growth.”
ANUJ PURI, CHAIRMAN, ANAROCK GROUP
“From a real estate perspective, the budget delivers both direct and indirect benefits, acting as a catalyst for growth. However, a notable shortfall was the absence of major announcements for the affordable housing sector, leaving stakeholders disappointed.”
APOORVA RANJAN SHARMA, CO-FOUNDER & MD, VENTURE CATALYSTS
“The announcement of a 100 billion rupee ($1.16 billion) Fund Of Funds and the exploration of a dedicated Deep Tech fund in the Union Budget 2025 is a monumental step towards strengthening India’s startup ecosystem.”
“By expanding the scope of funding and focusing on high-impact sectors like deep tech, this initiative will provide much-needed ‘patient capital’ to startups working on cutting-edge technologies such as AI, robotics, blockchain, and clean energy.”
SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM
“Addressing concerns around slowing demand from the middle class, the budget rationalised personal income tax slabs across the board along with revision in the limits of the tax deducted at source. This is likely to spur consumer demand and savings by the middle class that has faced challenges from elevated inflation and lower income growth.”
“Today’s budget announcement solidifies our expectation of 6.6% of GDP growth in 2025-26. No major surprises for the bond market with the market borrowings broadly in line with expectations. This along with the upcoming rate cuts and Open market purchases by the Reserve Bank of India, bond yields are expected to trend lower.”
BALAMURUGAN SHANMUGAM, CHIEF INVESTMENT OFFICER, AVIVA INDIA
“The increase (in insurance sector foreign direct investment) limit from 74% to 100% should not just be viewed as an incremental 26 percentage points. This is rather a paradigm shift. This is expected to bring in more players and more capital from existing players.”
“In addition to bringing in much-needed FDI into the country, this will also bring in better technical capabilities and new propositions for the overall benefit of the customers.”
AASIF MALBARI, CHIEF FINANCIAL OFFICER, GODREJ CONSUMER PRODUCTS
“The Union Budget 2025 takes a balanced approach by strengthening rural infrastructure, manufacturing, and consumer spending – three critical pillars for the FMCG sector.”
“Investments in rural development and job creation will boost economic activity and drive higher consumption, opening new opportunities for market expansion.”
“Tax reforms benefiting the middle class will increase disposable income, further fueling demand across essential and aspirational FMCG categories.”
RADHIKA GUPTA, MD & CEO, EDELWEISS ASSET MANAGEMENT
“This budget boldly addresses the need of the hour: putting money into the hands of the middle class through meaningful tax reliefs. This will energise consumption and growth at a critical time for the Indian economy.”
DEEPASHREE SHETTY, PARTNER, GLOBAL EMPLOYER SERVICES, TAX & REGULATORY SERVICES, BDO INDIA
“The proposal to exempt income up to 1.2 million rupees ($13,867.06) is a big boost to the middle-class taxpayers. This is in line with the recent measures to make the new tax regime a preferred tax regime. It would also create more disposable income for the taxpayers, strengthening their expenditure power.”
RC BHARGAVA, MARUTI SUZUKI CHAIRMAN, TO ET NOW
“The tax cut is going to be a helpful factor in accelerating demand for various kinds of consumer products.”
ANITHA RANGAN, ECONOMIST, EQUIRUS
“While capex growth does not look very robust, implicit capex via long-term reforms shows promise. Simplification of direct taxes reforms will be announced in a week, but the icing on the cake came in the end with income tax relief to the middle class with direct tax foregone of 1 trillion rupees.”
RADHIKA RAO, DBS BANK, SENIOR ECONOMIST
“Budget announcements carried a short as well as a medium-term focus. Fiscal discipline was accorded priority, underscored by improvements in FY25 and budgeted FY26 deficits.”
“Following through with previous signals to align deficit targets with debt levels, a forward-looking glide path has been outlined. The qualitative focus was wide-ranging with a bias to support growth. Taking a pre-consumption bent, tax relief was extended to consumers.”
“One of other major pillars was also to expand India’s footprint in global supply chains and boost exports, towards which a re-assessment of regulatory reforms will be undertaken to improve the ease of doing business, along with further rationalisation in import tariffs.”
($1 = 86.5360 Indian rupees)
(Reporting by Bengaluru, Delhi and Mumbai bureaux; Compiled by Chris Thomas; Editing by Eileen Soreng)
