Union Budget: Tax Relief, Lower Import Duties, Rationalizing GST Rates To Boost FMCG Consumption With consumption accounting for over 60 percent of India's GDP, boosting disposable income is critical to reviving demand

As we approach the Union Budget 2026, the Fast-Moving Consumer Goods (FMCG) industry is optimistic about measures that will stimulate growth, foster innovation and enhance consumer demand. The urban FMCG sector, a major contributor to India's consumption story, is experiencing a slowdown, particularly in mass-market segments.

Recent major company financial disclosures highlighted that the average consumption among lower-income urban consumers fell by 15 percent due to elevated food inflation, which remains above the RBI's comfort level of 6.4 percent. The last fiscal quarter saw a noticeable decline in sales volume growth in urban areas, with the mass-market segment dropping by over 10 percent in key metropolitan cities, according to Deloitte report on Budget expectation, 2025.

"A lot has been discussed on the moderation in urban consumption due to rising inflation, especially in food, so we anticipate that this Budget addresses these challenges through measures which could bring some relief to consumers. We expect continued emphasis on rural upliftment, with investments towards infrastructure development, technology upgradation, strengthening of rural distribution networks and employment generation that will bolster the rural agricultural and non-farm economy, and further enhance rural consumption. These actions will directly and indirectly also enable new job opportunities," said Saugata Gupta, MD & CEO, Marico Limited.

Tax relief measures for the middle-class and salaried classes, will enhance their disposable incomes, translating into higher demand, thereby boosting economic activity, especially in urban India.

"the Budget is a great opportunity to create an inclusive and sustainable consumption growth story. Through reforms such as incentivizing investments, the government can unleash the real power of the consumption economy. Lowering oil import duties, rationalizing GST rates, generating rural employment, This would translate into an uplift in consumption and translate to sustained economic growth," said Aasif Malbari, CFO, GCPL.

India's GDP growth is expected to moderate to 6.3 percent in FY25, as per World Bank estimates, reflecting the combined impact of fiscal consolidation and tighter global credit conditions. Core inflation remains at a manageable 4.8 percent, but food inflation poses challenges at 5.1 percent due to global supply chain disruptions. The country's current account deficit is projected at 1.9 percent of GDP, supported by a 13 percent rise in services exports, mainly IT services, which contribute $325 billion annually. This economic backdrop underscores the need for prudent fiscal policies that prioritise consumption revival, infrastructure development and innovation-driven growth, the report stated.

In order to boost consumption, the government needs to introduce higher income tax exemptions to boost disposable income. "Relax the basic income tax exemption limit under the old regime from INR2.5 lakh to INR3.5 lakh and raise the standard deduction under the new tax regime from INR 50,000 to INR 75,000. A 5–7 percent increase in disposable income for middle-income households could lead to a 6 percent rise in consumer spending on FMCG and other essential goods. This is expected to contribute to a 0.7 percent growth in GDP directly," said Anand Ramanathan, partner and consumer, Products and Retail sector Leader, Deloitte.

With consumption accounting for over 60 percent of India's GDP, boosting disposable income is critical to reviving demand. The urban middle class, a significant portion of the consumer goods market, has shown a cautious spending pattern due to stagnant income growth and high inflation. Tax relief will alleviate financial pressure and stimulate spending.

"Simplification and rationalization of the tax regime will also ease compliance, reduce operational costs, and strengthen supply chains, benefiting the industry and consumers alike," added the Marico CEO.

"I am anticipating the Union Budget 2025 to bring much-needed relief in the form of reduced taxes on oil, which have seen a substantial hike this financial year. This increase has significantly impacted both consumer spending and industrial operations. A rationalization of these taxes would not only ease the financial burden on households but also provide a critical boost to industries like ours, where oil is a key input," said Mr. Rishabh Jain, chief financial officer, Bikaji Foods International Ltd.