Will tax cuts, incentives, and policy boosts drive market growth
The Union Budget 2025, set to be presented on February 1, 2025, is anticipated to introduce several measures aimed at stimulating economic growth and supporting various sectors. Analysts and industry stakeholders have outlined expectations for key industries that may benefit from the upcoming budget announcements.
Consumer Staples and Agricultural Inputs
To address the economic slowdown and maintain macroeconomic stability, the government is expected to implement measures such as income tax cuts and enhanced schemes to boost rural incomes. These initiatives could positively impact consumer staples and agricultural input companies by increasing disposable income and demand in rural areas. Additionally, higher subsidies for fertilizers and capital infusion into state-owned insurers are anticipated, further benefiting these sectors.
Consumer Discretionary
A notable income tax cut for individuals earning between 1 to 2 million rupees annually is expected to lift consumer discretionary demand. This move could positively impact companies such as Jubilant FoodWorks and Maruti Suzuki, as increased disposable income may lead to higher spending on non-essential goods and services.
Manufacturing and Textiles
Job creation is likely to be a key focus in the budget, benefiting manufacturing, construction, and textile companies. The success of production-linked incentive (PLI) schemes in electronics may lead to their expansion into other sectors, providing further support to manufacturing industries. Companies like Syrma SGS could stand to gain from such initiatives.
Renewable Energy and Electric Vehicles (EVs)
India’s commitment to achieving net-zero emissions by 2070 has heightened expectations for significant investments in renewable energy. The budget is likely to include expanded funding for solar and wind energy projects, with a focus on scaling green hydrogen initiatives. Additionally, the auto industry anticipates policy support, including tax relief, EV incentives, skill development programs, reduced GST rates on EV batteries, and improved infrastructure to promote electric vehicle adoption.
Infrastructure and Roadways
The government is expected to maintain steady capital expenditure in infrastructure, with a focus on roadways. The overall capital expenditure for this category is projected to remain at approximately ₹2.8 trillion, similar to previous years. This steady investment could benefit companies such as IRB Infrastructure Developers, KNR Constructions, and PNC Infratech, which are involved in road construction and related projects.
Healthcare and Pharmaceuticals
The Indian pharmaceutical and healthcare industry has high expectations from the upcoming budget. The sector is calling for increased government support to strengthen infrastructure and drive innovation. A proposed increase in healthcare budget allocation by 2.5% to 3% over the previous year is anticipated, with additional funds focusing on enhancing healthcare infrastructure, particularly in rural and semi-urban areas.
Financial Services
The financial sector is optimistic about measures that could simplify taxation and drive capital into vital areas such as housing finance, lending, and non-banking financial companies (NBFCs). Simplified GST procedures and targeted fiscal incentives are expected to empower these industries to adopt cutting-edge technologies, ensuring sustainable growth and fostering private sector innovation.
Information Technology and Artificial Intelligence
With India aiming for $300 billion in electronics manufacturing and $120 billion in exports by 2025-26, and artificial intelligence (AI) projected to contribute $450-500 billion to GDP by 2025, higher budget allocations are critical. The upcoming budget should prioritize increased funding to accelerate AI-driven growth in India’s electronics sector, fostering innovation and competitiveness.
Real Estate
The real estate sector is hopeful for transformative measures in the budget, including reducing the stamp duty burden on customers, revising home loan interest rates, and reviving the Credit Linked Subsidy Scheme. Additionally, relaxing Foreign Direct Investment (FDI) norms could open new avenues for investment, further bolstering the sector.
Micro, Small, and Medium Enterprises (MSMEs)
MSMEs play a vital role in India’s economy, and the upcoming budget is an opportunity to address their challenges while enabling growth. Strengthening the Credit Guarantee Scheme to provide seamless access to affordable funding will help MSMEs reduce their dependence on costly informal sources. Additionally, recognizing software products and packaged software as a distinct category and establishing the right taxation framework will ensure a fair and supportive system that encourages sustainable growth and competitiveness.
In conclusion, the Union Budget 2025 is poised to introduce measures that could significantly benefit various sectors, including consumer staples, manufacturing, renewable energy, infrastructure, healthcare, financial services, information technology, real estate, and MSMEs. The anticipated policies aim to stimulate economic growth, foster innovation, and promote sustainable development across these industries.
