Budget 2025 Should Focus On Job Creation, Consumption Amid Inflation, Says Ajay Bagga

High inflation, especially in food prices, and tight monetary policies have weighed down consumer spending and job creation, according to market expert Ajay Bagga. With the cost of the food basket rising while salaries remain stable, Bagga emphasised that Budget 2025 must prioritise job creation, boost consumption, and introduce mid-tier production-linked incentive schemes.

"You have to address the consuming classes," Bagga told NDTV Profit. He pointed out that while the government has provided a safety net with its policies, there is little money in the hands of the middle class or consuming class, which has led to reduced consumption in urban areas.

Bagga noted that while consumption in rural areas has increased, the surplus has been directed towards savings or loan repayments. He also highlighted that a significant portion of the economy is struggling, with many segments yet to feel the effects of recovery.

A key focus of the budget should be enhancing the manufacturing sector, particularly labour-intensive industries. By expanding PLI schemes for industries like textiles that are crucial to the middle class, the government can make products more affordable and accessible. This, in turn, would help generate jobs, raise wages, and stimulate consumption within the middle class.

With the labour market struggling, especially in urban areas, it is evident that more needs to be done to address the widening wealth gap. The K-shaped recovery from COVID-19 has seen capital owners benefit while wage earners have been left behind. To remedy this, Bagga advocates for a stronger focus on labour-intensive sectors that can create jobs and stimulate broader demand, addressing the economy’s imbalance and fostering more inclusive growth.

Additionally, the government must address the rising tax burden that has hurt both businesses and consumers. The recent increase in taxes on vehicle purchases and the creeping expansion of taxes on long-term gains have dampened sentiment, especially among small businesses and investors. A more favourable tax environment, with a focus on clarity and ease of doing business, will provide much-needed relief to the economy.