Middle-Class Tax Relief: A Strong Political Message

The Modi government’s big takeaway from Budget 2025 is its targeted outreach to India’s middle class. With zero income tax up to ₹12 lakh, the message is clear: “We care for you, and now you have more money to spend.”

This move directly benefits nearly 80% of India’s taxpayers, addressing long-standing demands from the salaried class, who often felt overlooked compared to the government’s welfare schemes for the poor and farmers.

Boosting Disposable Income & Consumption

The revised tax slabs, higher TDS limits for senior citizens, and increased rent deduction thresholds are designed to put more money in the hands of consumers.
This is a direct response to India’s slowing consumption, with festival season volume growth at just 3% and price growth between 1-2%.
The estimated impact? An additional ₹1 lakh crore in the hands of consumers—expected to revive spending and support economic momentum.

Immediate Market Reaction: FMCG Stocks Rally

Consumer-focused sectors, particularly FMCG stocks, saw an immediate uptick, reflecting investor optimism about increased spending power.
However, the broader stock market reaction was muted, as investors had hoped for more aggressive economic reforms beyond tax cuts.

A Conservative Budget Amid Global Uncertainty

Unlike the big-bang 1991-style economic reforms, this budget takes a prudent approach with a fiscal deficit of 4.5% and lower capital expenditure (capex) spending.
The government seems to be playing it safe, balancing fiscal responsibility with targeted relief for middle-class voters.
The Economic Survey signaled a need for bold moves, but the Finance Ministry opted for caution over risk-taking.

Political Calculations: Middle-Class Cheer vs. Corporate Caution

The budget is geared toward securing middle-class support in an election cycle.
While India Inc. and investors may have expected more structural reforms, the government appears comfortable prioritizing middle-class relief over aggressive pro-business policies—for now.

The Big Question: What’s Next?

With a stable fiscal approach and conservative capex, the government seems to be holding fire for a bigger move ahead.
Whether this strategy boosts economic growth or simply sustains voter goodwill remains to be seen.

In short, Budget 2025 is a political win for the middle class but a cautious one for India’s broader economic ambitions.