Daijiworld Media Network – New Delhi

New Delhi, Feb 2: The Union Budget 2025's emphasis on supporting lower and middle-income households is expected to stimulate private investment and boost economic growth, according to a report by HDFC Bank.

The report highlighted that weak consumer demand has hindered corporate sentiment, but the budget’s focus on providing financial relief to these households, who have a high propensity to consume, could provide the necessary push for economic recovery.

“By focusing on lower and middle-income households, where spending tends to increase with financial support, the government aims to boost consumption and, in turn, encourage private companies to invest in business expansion,” the report stated.

While capital expenditure (capex) generally has a more significant impact on growth than tax cuts, the report noted that weak and fragmented demand has kept private sector investments subdued. The budget’s consumer-focused measures, including rationalizing income tax slabs and increasing tax reliefs, are designed to increase disposable income and encourage spending, particularly among households affected by high food inflation and slow wage growth.

The government also continues to prioritize infrastructure spending, with an expenditure target of Rs 50.7 lac cr for FY26, marking a 7.4% increase from the previous year. The report forecasts India’s GDP growth at 6.6% for FY26, driven by the expected improvement in rural demand, bolstered by strong agricultural output.

The report emphasized that the combination of a consumer-centric approach and continued infrastructure investment aims to create a positive business environment, fostering private investment and supporting economic recovery.