Union Budget 2025-26: Tax cut announced by FM expected to boost consumption

Offering relief to the struggling consumer economy of the country, Finance Minister Nirmala Sitharaman on Saturday made some announcements in her Budget speech that have the potential to provide a major boost to the subdued consumer economy. With income tax slabs now revised for the FY26, making incomes up to Rs 12 lakh tax free, consumer goods makers are expecting a turnaround in demand that has been long awaited.

As the tax outgo for a significant majority of the salaried class is set turn to zero from the next financial year, industry stakeholders and experts expect a major boost in consumption of daily essentials like fast-moving consumer goods, consumer electronics and appliances and small passenger vehicles, among others.

According to Angshu Mallik, Managing Director and Chief Executive Officer of Adani Wilmar, the tax relief provided in the Budget FY26 will increase the purchasing power of middle-income households. “The focus on tax relief 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,” said Mallick.

Aasif Malbari, Chief Financial Officer of Godrej Consumer Products, said, “tax reforms benefiting the middle class will increase disposable income, further fuelling demand across essential and aspirational FMCG categories. Overall, the Budget lays a strong foundation for a more consumption-driven economy, creating significant growth opportunities for the FMCG industry.”

Welcoming the Union Budget, Sunil Agarwal, Co-founder and Chairman of Joy Personal Care (RSH Global), said its strategic focus on economic growth through increased consumer spending power will help the consumption economy. “The proposed income tax reforms are poised to enhance disposable income, driving demand across the FMCG sector, including beauty and personal care,” he said.

Consumer facing industries like FMCG, consumer durables and electronics and small passenger vehicles have been struggling to grow for several quarters as steep inflation has impaired low-to-middle income households’ purchasing power. The FM’s move to reduce the tax burden on the middle-income households, thus, has brought a cheer to manufacturers and retailers.

“The increase in income tax exemption to Rs 12 lakh is a welcome relief for the industry that had witnessed reduced consumption in the past year. Better consumption means better business for retailers. The expansion of MSME benefits, including easier access to credit, customised credit cards, and the new Fund of Funds, should drive a wave of new products and innovations, increasing supply and competition in the market,” Kumar Rajagopalan, CEO, Retailers Association of India explains.

“Overall, this is a progressive, growth-driven budget that strengthens retail, empowers businesses, and prioritises consumption as a key driver of economic momentum,” he adds.