Budget 2025: Tax Relief To Consumption Boost, Budget Masters React To Sitharaman's Speech

Finance Minister Nirmala Sitharaman tabled the Union Budget 2025–26 in Parliament on Saturday, the first full budget under Prime Minister Narendra Modi's third term.

The most-cheered announcement across the budget speech was the one to slash income taxes for low earners to spur consumption. Individuals with income up to Rs 12 lakh will be exempt from paying income tax. This is against the previous cap of Rs 7 lakh.

The government will narrow the budget deficit for fiscal 2026 to 4.4% of the gross domestic product, slightly below the 4.5% previously estimated.

Here's what the Budget Masters from NDTV Profit's special budget shows have to say about the economic and financial roadmap announced in the budget.

The Union Budget strikes a balance between fiscal prudence, urban consumption growth and capital expenditure, according to Nilesh Shah, managing director of Kotak Mahindra Asset Management Co.

"The Union Budget is a Triveni Sangam of fiscal prudence, a boost to urban consumption, and maintaining capex so that it remains growth-oriented," Shah stated.

He emphasised the importance of a cautious approach. "It's always better to be fiscally prudent. While there may be a compelling case for ignoring fiscal constraints during crises, the current scenario calls for a disciplined fiscal path," he added.

The Union Budget marks a significant shift in fiscal strategy, moving away from capital expenditure and focusing more on revenue spending, according to Saurabh Mukherjea, founder of Marcellus Investment Manager.

"This is a very different budget from what we have seen in the last five years. It signals a decisive change in direction from the NDA government," Mukherjea said. "For the first time in five years, capex growth is as low as 10%, while revenue expenditure is seeing double-digit growth."

He noted that the tax relief for the middle class is a major boost for consumption, which has been sluggish. "The emphasis on pro-poor and pro-MSME measures stood out," he added, comparing the budget to the policies seen during the NDA's first term.

Market veteran Vijay Kedia described the Budget 2025 as "unexpected", noting that he did not anticipate the income tax slab to exceed Rs 10 lakh. "This is a good reform following GST and other implementations," he said.

Kedia highlighted that the Rs 1-lakh-crore injection into the system would boost consumption and benefit the middle class. However, he cautioned that in a $4 trillion economy, the impact remains limited. "This is not going to take the stock market to a new high," he stated.

On long-term growth, he stressed the need for bold measures. "If we want to become a $30 to $40 trillion economy, we have to think of something unexpectedly surprising," he said. While India claims to be the fastest-growing economy, Kedia pointed to the country's base. "Unless we grow at 15–20%, I don't think we can reach that point," he added.

The latest budget is broad-based and covers several critical aspects of the economy, particularly in areas that drive growth and consumption, said Keki Mistry, chairman of HDFC Life Insurance.

"The lowering of tax rates and the increase in the minimum exemption limit will clearly spur consumption," Mistry noted. "This was the key factor I was looking for, and it has been met. This will provide a huge boost in the coming days."

In addition to consumption, the budget includes sufficient measures to facilitate job creation, which will have a lasting economic impact. However, Mistry believes it is too early to gauge the full extent of the budget's effect on overall growth.

"For growth, it's too premature to comment. We need to analyse the budget in more detail, but historically, reducing tax rates leads to increased consumption, which in turn fuels economic growth," he explained.

The 2025 budget stands out as a well-balanced and confidence-boosting exercise, unlike previous ones that focused only on minor tax adjustments, according to Pranav Sayta, national leader, International Tax and Transaction Services, EY India.

"This budget creates an atmosphere of tax excitement and encourages consumption, which was the need of the hour," Sayta noted. He emphasised that instead of imposing excessive taxes, the government has prioritised building a taxpayer-friendly environment, ensuring that economic momentum — especially in consumption — remains strong.

"Unlike many budgets over the last decade, which saw only small tweaks, this one has been executed far more gracefully," Sayta added. He believes the measures will significantly boost consumption and confidence and reinforce the taxpayer’s sense of contribution being recognised.

The Union Budget has effectively addressed the consumption and confidence deficit in the markets, according to Gautam Shah, founder of Goldilocks Premium Research.

"It's a step in the right direction. There was a consumption and confidence deficit from a market perspective, and the government has done a phenomenal job to address the same," Shah said.

He noted that the market's bounce-back reflects growing confidence. "The government's job has been done to a large extent. If the RBI policy next week is more economy- and market-friendly, it will further boost sentiment," he added.

Shah emphasised that the budget was "the need of the hour" and praised the government for "hitting the nail on the head", expressing optimism that India will align with global market trends soon.

The budget contains multiple provisions that will aid credit growth and support banks’ participation in the government’s economic agenda, according to CS Setty, chairman of the State Bank of India.

MSMEs and the agricultural sector, which significantly contribute to employment, have received due attention. "Credit plays a crucial role in these sectors, and MSMEs have long demanded a revision in investment and turnover limits. This budget improves credit flow to them," Setty said.

Additionally, banks will benefit from adjustments to PSL norms as the new measures will help meet targets more efficiently, he added.

The government has continued its backing of the MSME Credit Guarantee Scheme by lowering guarantee fees. SBI has disbursed 1 lakh MSME loans worth Rs 34,000 crore in the past 10 months through cash flow-based lending. "This figure is expected to multiply due to improvements in the scheme," Setty noted.

The recent tax slab revision is a positive step for the middle class, providing almost Rs 1 lakh crore in tax incentives, which could boost consumer spending, according to Mihir Vora, CIO, TRUST Mutual Fund.

"The government has done enough; now it’s time for private capex to kick in," Vora said, highlighting the need for private sector investments to sustain economic growth. He noted that while India has seen an annual growth rate of 25–30% in capital expenditure over the last five years, this pace is not sustainable due to fiscal limitations.

"With tax incentives in place and urban demand picking up, we expect the private sector to enter an investment phase," Vora added.

The reduction in taxes for salaried individuals is a major positive that will boost sentiment and drive demand, said Atul Lall, Managing Director, Dixon Technologies. "This is a very significant step forward, as it aligns with the need of the hour—stimulating consumption," Lall stated.

On capital expenditure, he acknowledged a minor reduction but emphasised that the finance minister is staying on the path of fiscal consolidation. "This approach signals that we are building for the future without increasing government debt, which is a prudent and responsible strategy," he added.

The budget successfully balances multiple priorities, providing a much-needed consumption boost, according to Sandeep Bhatia, Managing Director, Head of Equity India, Macquarie Capital.

"Focusing on just one number is the wrong way to look at the budget. People needed a consumption boost, and that’s exactly what has been delivered," Bhatia said.

He emphasised that while there was no room for both capex and consumption boosts, the measures taken are sufficient. "With the tax cuts, growth concerns will not go away immediately. What could have been done has been addressed in the budget," he added. The base case assumption is there will be consolidation in fiscal spending and there will be pressure on the rupee, he said.

The budget effectively balances multiple priorities, focusing on demand stimulus, manufacturing, and inclusive development, according to Anish Shah, Group CEO and Managing Director, Mahindra Group.

"We see three major themes in this budget. First, the much-needed demand stimulus—the tax relief for individuals—will translate into higher spending, which will be positive for companies and improve private sector capex," Shah stated.

The second key focus is Make in India, which he believes is essential for long-term economic strength. "The incentives provided will help bring down manufacturing costs and make India more competitive globally. These are steps in the right direction," he added.

The third pillar is inclusive development, with targeted support for agriculture, MSMEs, and skilling initiatives. "These are all critical factors for sustained economic growth," Shah emphasised.

Overall, the budget's balanced approach continues to drive the strong fundamentals of the economy, he said.

The tax announcements have provided a significant boost to urban demand, with the highlight being the long-awaited new income tax code, according to Rashesh Shah, co-founder of Edelweiss Group.

"The tax announcement is a big boost, lifting urban demand and was the highlight of the entire budget," Shah said. "The introduction of a new income tax code is a welcome step that will simplify the outdated and complicated system."

The government's decision to allow 100% FDI in insurance is "a very bold announcement" that reflects the commitment to expanding the sector, he said.

However, Shah expressed concerns about India’s growth trajectory, stating, "India needs to grow at 8% annually, but the budget projects 6.8% in real terms, which is too low. I was hoping for more."

He emphasised the critical role of capital expenditure in the first half of the year, noting that private capex will only follow when demand strengthens. "The budget takes a conservative approach to the fiscal deficit, keeping bond markets in mind, but I would have liked a slightly more aggressive growth push."

The finance minister’s announcement of establishing a Centre of Excellence for AI in Education and creating a deep tech fund to catalyse future startups is a welcome move, according to Puneet Chandok, president of Microsoft India and South Asia.

As the Economic Survey 2025 highlights, India must capitalise on AI opportunities and leverage its young and dynamic population to create a tech-forward workforce for India and the world, Chandok said. "This resonates deeply with Microsoft’s work in the country and our commitment to put AI in the hands of everyone."

"Putting more money in the hands of the middle class for consumption, saving and investments was expected and was delivered," said the Deputy Managing Director of Kotak Mahindra Bank, Shanti Ekambaram.

"The fiscal prudence of 4.4% is very good in my view. One of the things we saw this year was that the growth had slowed down because of the slowdown of capital expenditure by the government," she said.