India Budget: India's tax cut plans will spur consumption, top execs say (updated)

Britannia Industries

01/02/2025 09:45

(Adds consumer, trade body and company reaction; updates
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    By Praveen Paramasivam and Sai Ishwarbharath B
       CHENNAI/BENGALURU, Feb 1 (Reuters) - India's plans to
cut personal income tax rates will put more disposable income in
the hands of the people and eventually boost consumption in the
world's fifth-largest economy, top executives said on Saturday.
    The comments came after the government in its annual budget
said that people earning up to 1.28 million rupees ($14,800) per
year will not have to pay any taxes, raising its threshold from
700,000 rupees. It also cut tax rates for people earning above
the new threshold.
    Private consumption accounts for about 60% of India's gross
domestic product.
    Consumption in India has been under stress in the last few
quarters as shoppers tightened their purse strings amid stubborn
inflation and modest wage growth.
    "Tax reforms benefiting the middle class will increase
disposable income, further fuelling demand across essential and
aspirational categories," Godrej Consumer Products'  GOCP.NS 
CFO Aasif Malbari said.
    The news boosted the shares of consumer goods  .NIFTYFMCG ,
autos  .NIFTYAUTO  and realty  .NIFTYREAL  firms by 4.1%, 2.1%
and 3%, respectively. It also pushed the shares of food delivery
firms Zomato  ZOMT.NS  and Swiggy  SWIG.NS  7.8% and 8.7%
higher, respectively.
    The government's plan is estimated to help around 25-30
million personal tax payers save about 100,000 rupees annually,
according to Kamal Bali, managing director of Volvo Group India.
    "It will boost discretionary capital spends like buying a
vehicle. (People) will have better repaying capacity for EMIs,"
Bali told Reuters.
        Others echoed the sentiment.
    "The tax cut is going to be a helpful factor in accelerating
demand for various kinds of consumer products," RC Bhargava,
chairman of Maruti Suzuki India  MRTI.NS , India's top carmaker,
told TV channel ET Now.
    The Federation of Automobile Dealers Associations (FADA), a
trade body, expects the government's plan to make car upgrades
affordable to more middle-class families, leading to higher
demand for SUVs, sedans, and premium two-wheelers.
    Some consumers welcomed the news.
    "I would have one less stressful obligation since I would no
longer have to pay taxes," Chennai-based software engineer S.
Surya said, adding he planned to use the money he saved "on
higher-quality essentials and restaurant visits".
    Some others were less thrilled.
    "They haven't reduced goods and services tax or petrol
prices," Pranav Charan, another engineer, lamented.
    
($1 = 86.5360 Indian rupees)

 (Reporting by Praveen Paramasivam, Sai Ishwarbharath B and
Nishit Navin; Editing by Dhanya Skariachan and Sonia Cheema)
 ((Praveen.Paramasivam@thomsonreuters.com; +91 867-525-3569;))