Budget 2025: Can it turn around India’s consumption trends?

Consumption in India has been sluggish for several quarters, and experts are closely watching the upcoming Union Budget 2025 for measures that could help stimulate demand and drive economic growth. The rising cost of living, particularly in food prices, has forced consumers to rethink their spending habits, especially when it comes to discretionary items.

This trend is reflected in the subdued performance of India’s fast-moving consumer goods (FMCG) sector, which has experienced low single-digit volume growth and negligible pricing growth over the past year.

Given this backdrop, a significant focus of Budget 2025 is expected to be on policies that can boost consumer spending.

According to experts, one of the most important steps the government could take is to increase disposable incomes by revising the direct tax structure. The consumer industry has called for tax relief for the middle class and salaried individuals, arguing that such measures would put more money in the hands of consumers, thereby encouraging demand.

Urban areas, which have seen a prolonged slowdown in consumption, would particularly benefit from such changes. Furthermore, there have been calls for a simplification of the goods and services tax (GST) structure to make products more affordable.

Another key area under consideration is job creation. Last year’s Budget introduced several employment-linked incentives, including an internship scheme and direct benefit transfer initiatives for first-time employees.

For Budget 2025, there is an expectation that the government will focus on measures to encourage infrastructure development through both public and private sector investments. This is likely to generate jobs, increase productivity, and fuel economic growth.

Some experts have also highlighted the need to strengthen India’s digital economy by investing in technology, digital infrastructure, and skills development, all of which would support entrepreneurship and help create additional jobs.

In addition to urban areas, rural India, where over 65% of the population resides, is also a key focus for policymakers. Experts suggest that the upcoming Budget should prioritise continued investment in rural infrastructure, direct benefit transfer programmes, and strengthening the agricultural value chain.

Promoting digital penetration and affordability in rural areas will also help increase disposable incomes, creating a ripple effect on consumption patterns.

Last year’s Budget saw some increases in rural and agricultural allocations, and experts predict that this year’s allocations could rise further, with a focus on rural housing, road development, and programmes like MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act). This is particularly important for the FMCG sector, as 35% of its sales come from rural markets.

Ultimately, consumption is a critical driver of India’s economy, accounting for more than 60% of the country’s GDP. The measures proposed for Budget 2025 could be crucial in reviving consumer demand and boosting economic activity.

As the country looks ahead to the Budget, many are eager to see what steps will be taken to address the ongoing consumption slowdown and set the stage for economic recovery.