Consumption Boost, Inclusive Growth, Fiscal Consolidation And More — Top Brokerages On Budget 2025

The Union Budget for FY26 marks a shift from capex-heavy spending towards a more balanced approach, prioritising inclusive development and demand-driven growth, according to brokerages.

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.

Axis Capital noted that the Finance Minister’s speech largely omitted mentions of infrastructure-heavy sectors such as roads, highways, defense, and railways.

While total capex is set to rise 10% to Rs 11.2 trillion in fiscal, key sectors like roads and railways saw flat allocations. "Among positives, the Jal Jeevan Mission received a 195% increase in allocation to Rs 670 billion, while nuclear energy reforms saw a push," Axis Capital stated. However, it observed that frontline capital goods, engineering & construction, defense, and power utility stocks underperformed post-budget.

Kotak Securities highlighted the government’s continued focus on fiscal consolidation while boosting consumption. "The FY26 Budget estimates a fiscal deficit-to-GDP ratio of 4.4%, supported by a 10.8% increase in gross tax revenues and a 6.7% rise in revenue expenditure," it said.

The budget also left corporate tax rates unchanged but increased the exemption and upper limits for individual income tax, giving relief to taxpayers.

ICICI Securities emphasized that the tax cuts and rebates for middle-income groups will enhance consumption. "The revised tax slabs benefit those earning between Rs 7 lakh and Rs 24 lakh annually, leading to a tax foregone amount of Rs 1 trillion," it noted.

However, the brokerage flagged risks to the fiscal deficit target, stating, "Despite tax concessions, the government has projected a 14% YoY rise in direct tax collections, which may be ambitious given the 10% nominal GDP growth estimate."

Elara Capital observed a structural shift in budget priorities under PM Modi’s government. "From a capex-heavy model, the focus has moved towards boosting demand, especially in urban areas," it said.

Despite a steady capex-to-GDP ratio of 3.1%, spending has shifted from roads and railways towards ports, maritime, and urban infrastructure. "Policy incentives have moved from corporate-centric initiatives, such as corporate tax cuts and production-linked incentive schemes, to consumer-driven demand stimulation," it added.

The brokerage also noted that a fiscally prudent approach to managing debt-to-GDP will open more fiscal space in future budgets.

The brokerage see the budget balancing fiscal prudence with targeted growth. Tax relief aids the middle class, though spending may be muted. Rural support improves with Kisan Credit hikes and agri schemes. Capex growth slows to 10% YoY, but PLI incentives surge in electronics, semiconductors, and AI.

Key allocations remain in roads, railways, and defense, signaling a shift toward consumption and industry incentives over aggressive public spending.