Response to the Budget by HDFC Bank's Principal Economist, Sakshi Gupta

Udaipur. In light of concerns about reduced demand from the middle class, the budget rationalized personal income tax slabs and revised the tax deduction limit at source. This is expected to boost consumer demand and savings among the middle class, which had been facing challenges due to high inflation and low income growth.  
Sakshi Gupta, Principal Economist at HDFC Bank, expressed her response to the budget, stating that beyond the relief for the common man, the focus of the budget is on improving ease of doing business through a "light touch" regulatory approach. The financial strategy for the next five years has been designed to promote agriculture, MSMEs, exports, and increase private sector participation in India’s capacity building. The finance minister's financial strategy leans towards boosting consumption, while the capital expenditure target has largely remained unchanged from the 2024-25 budget plans.  
The counter-cyclical pressure provided by the budget is part of its broader strategy for fiscal consolidation, targeting a fiscal deficit of 4.4% in 2025-26. Despite a reduction in revenue due to income tax changes, fiscal consolidation is being achieved through pressure on the expenditure side in 2025-26. The budget announcement today strengthens our expectation of a 6.6% GDP growth in 2025-26. There is no major surprise for the bond market, as borrowing is largely in line with expectations. With anticipated rate cuts and open market purchases by the RBI, a decline in bond yields is expected.