Union Budget 2025: FM strengthens the backbone of India’s consumer economy

The retail sector, a key driver of the economy, stands to benefit significantly from measures aimed at increasing disposable income, boosting consumer confidence, and strengthening supply chains. At the same time, targeted interventions in infrastructure, digitalization, and rural development will create a more resilient and interconnected economy, ensuring long-term prosperity for businesses and communities alike.

With some of the measures announced, the latest budget promises to be a watershed moment for the entire consumer ecosystem.

Empowering the middle class and driving consumption

A thriving middle class is the backbone of a strong consumer economy, and Budget 2025 takes important steps to enhance their purchasing power. Tax relief measures, including revisions in income tax slabs and increased deductions, will provide much-needed financial flexibility to households. By putting more money in the hands of consumers, these reforms are expected to drive demand across key retail and healthcare categories.

Read more: Andy Mukherjee: India has slashed income tax but still needs to snip red tape

In urban markets, where essential spending has become the norm, the budget’s move to relax the taxation structure for the middle class can stimulate discretionary spending. The limit for tax-exempt interest earned by senior citizens has been increased from ₹50,000 to ₹1,00,000, while the move to have zero tax for incomes of up to ₹12,00,000 will also be a major relief for salaried individuals. This balanced approach acknowledges the dual nature of India's consumption story and the need to cater to both segments effectively.

In addition, policies supporting home ownership, and incentives for savings and investment will strengthen long-term financial security, leading to higher consumer confidence and sustained spending. The expansion of social security schemes and healthcare benefits further ensures that the middle class can spend more freely without financial anxieties, ultimately benefiting FMCG and allied sectors.

Hightailing retail: A new chapter of growth

Budget 2025 takes a progressive approach by emphasizing policies that enhance retail infrastructure, logistics efficiency, and ease of doing business. The announced corpus of ₹1.5 trillion for 50-year, interest-free loans for capex and infrastructure requirements signals a recognition of the sector's evolving needs. The move will incentivize state governments to invest in modernizing the traditional FMCG and supply chain infrastructure, particularly in rural, tier-II and III geographies—thus addressing major operational challenges to enhance the sector’s competitiveness.

Furthermore, the government’s ₹11.2 trillion capital allocation ensures targeted investments in high-impact areas like roads, railways, and airports, which is expected to create a multiplier effect, accelerating capital formation, improving logistics, and boosting consumption-driven sectors like retail and FMCG.

Read more: When consumption push and fiscal consolidation go hand in hand

The budget also demonstrates a nuanced understanding of the distinct needs of rural and urban markets. For instance, the Prime Minister Krishi Yojana will see the government launch an agricultural district programme with state governments, to transform 100 districts with low productivity, moderate crop intensity, and below-average credit parameters. This measure is expected to benefit 1.7 crore farmers by boosting agricultural productivity through crop diversification, sustainable farming practices and more.

Continued push towards digitalization, and fintech adoption, will further streamline retail transactions and deepen financial inclusion. The digital commerce landscape will receive significant attention through the ₹10,000 crore corpus announced to drive entrepreneurship. The move will strengthen the infrastructure, supporting online retail and digital brands and may particularly benefit those in the direct-to-consumer (D2C) space.

Supply-chain resilience is another crucial factor in ensuring consistent retail growth. The government’s commitment to expanding cold storage facilities, improving warehousing capacity, and strengthening last-mile connectivity through better road and rail networks will enhance retail efficiency, particularly for FMCG and agricultural products.

Looking ahead: sustainable and inclusive growth

Budget 2025 presents a well-calibrated approach to economic development, ensuring that growth is broad-based, inclusive, and future-focused. By empowering the middle class, boosting consumption, strengthening retail infrastructure, and bridging the urban-rural divide, it lays the groundwork for a more dynamic and resilient India.

Saugata Gupta is managing director and chief executive officer, Marico Ltd.