The Union Budget 2025 introduced various reforms in the form of increased spending in infrastructure, job creation, and other essential sectors. However, with the announcement of a revision in the income tax slab rate offering zero tax on up to ₹12 Lakhs per annum income, a significant shift improvement can be seen in the consumption sector. With a rise in disposable income, overall spending and savings will increase therefore offering a significant boost to companies engaged in FMCG, automobile, food delivery, and other consumption-based sectors.
The following article explores the effect of Union Budget 2025 decisions on Consumption in the Indian economy and how it can prove beneficial for related companies;
- Income tax slab revision:
The central government offered respite to middle-class families and individuals in India by revising the income tax slab rates. Offering zero tax benefit on income of up to ₹12 LPA, the government has foregone the tax revenue of more than ₹1 lakh crores. The aim behind this decision is to improve the total household income of Indian consumers which further can be spent on essentials like food and clothing and other luxury products. With a revision in income tax slab rates, consumption is bound to increase thereby prompting FMCG, healthcare, pharma, lending, and other consumption-based businesses.
- Effect on consumption-based stocks:
The slab rate revision and subsequent improvement in the disposable income of Individuals can drive growth in terms of increase in consumption, more deposits, savings, and spending on other necessities. This in turn will drive a demand for consumption-based products like groceries, cars, online food delivery services, clothing, and essential and luxury products. Companies like ITC and Tata Motors will benefit from this increased spending and demand thereby helping in achieving overall business growth. Let’s explore the positive effect of budget decisions on ITC and Tata Motors share prices:
- ITC
Serving as a major FMCG company in India, ITC can benefit greatly from the increased demand from customers. Moreover, with the budget decision, a significant uptick in the ITC share price can be seen thereby serving as a positive sign for the company and its long-term growth. An overall increase in the income for taxpayers will ensure a greater demand for staple food products that ITC sells under different brand names. The company can capitalize on this increase in individual purchasing power helping them achieve business growth and improvement in its stock price.
- Tata Motors:
Being a prominent and established automobile maker, Tata Motors can reap maximum benefits from the budget decision to reduce the tax liability of the Indian taxpayers. With more disposable income, the demand for automobiles will increase helping obtain better car sales and overall business growth and profitability. The Tata Motors share price even witnessed an increase on the same day making it a positive sign for both short and long-term investors.
Overall, The Budget 2025 and the various decisions taken to boost consumption serve as a positive sign for overall investment sentiment. Investors looking for great consumption stocks to add to their portfolio must surely consider ITC and Tata Motors amongst various others. However, proper research and analysis are recommended before investment.