The Union Budget 2025-26 has been noted for its fiscal prudence and a clear focus on reviving consumption. Vinay Paharia, CIO of PGIM India Mutual Fund, emphasized that the government has prioritized consumption-driven growth over investment demand, aiming to stimulate economic activity by empowering the middle class.
“The Union Budget 2025-26 has adhered to the path of fiscal consolidation and has clearly favoured boosting consumption over investment demand,” Paharia stated. He highlighted that the Finance Minister’s decision to transfer more money into the hands of tax-paying middle-class citizens is expected to lead to a revival in consumption demand, particularly after a slowdown over the past two quarters. “FM has preferred consumption by transferring money in the hands of tax paying middle class. This could lead to improved consumption demand, which had seen a slowdown since last 2 quarters,” he added.
However, Paharia also pointed out that while consumption has been prioritized, there has been a curtailment in capital expenditure. “On the flip side, capital expenditure has been curtailed in a relatively lower base and is now expected to grow in line with the nominal GDP,” he explained. This suggests that while infrastructure investments may continue, their growth will be more measured, aligning with the broader fiscal goals of the government.
The Union Budget 2025’s approach reflects a balanced strategy—focusing on fiscal consolidation while addressing immediate needs to boost consumption and stimulate economic growth, particularly through middle-class tax relief.
