Can the Union Budget revive lacklustre consumer demand and boost growth?

The budget comes at a time when consumer demand remains lacklustre, private capex shows no signs of picking up, and geopolitical threats to exports are evident. Some expectations:

 

Economists note that the recent equity market decline is impacting capital gains tax revenues. Preliminary analysis shows that about one-third of the previous year's rise in tax-to-GDP ratio came from equity market gains. Despite this, they believe the fiscal deficit target of 4.9% is achievable, largely due to subdued expenditure growth, recorded at 3% y-o-y year-to-date in November, against a budgeted 9% for FY25. Capex has also lagged, falling 12% y-o-y in the same period, compared to a budgeted 17% increase.

 

If tax revenue growth is softening and expenditure growth is weaker than budgeted, the fiscal deficit target will likely be met - but for reasons different from those anticipated. However, it is crucial to ensure sufficient expenditure to support growth. GoI's continued investment in infra will be vital to sustaining growth momentum. The capital outlay in Budget 2024 was ₹11.11 lakh cr. Ficci has proposed increasing capex in FY26 by 15% over FY25.