Can consumption stimulate the Indian economy?

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In one punch, the Minister of Finance of India Nermalla Setharmann Removing taxes for people With annual profits up to 1.2 million Indian rupees ($ 13,694), an increase of a previous threshold of 700,000 Indian rupees.

This procedure is expected to benefit 10 million taxpayers With savings that can be directed towards investing or buying goods and services. This translates into a 1 trillion Indian trillion Ruby In the annual treasury revenue.

Almost levels of consumption in India By three to 200 trillion Indian rupee in the past decade, along with the growth of the country's population 294.3 million families. The part is now explained around it 60 % of India's economy – which makes it the best growth driver.

Upasana Cachra, the chief economist in India in Morgan Stanley, describes consumption as “one of the main people of the Indian economy.”

“There is no denial that he plays an important role in providing stability towards the final demand,” CNBC inside India said.

Cracks in consumption

However, the government laser focus on promoting consumption – on the development of infrastructure, which focuses on it historically – comes in response to deep cracks in consumer spending.

With the exception of the luxury market and the sectors that serve the countryside, the levels of consumption in the sectors were diminished as a resident of the cities in India – who struck 522.9 million As of 2023 – Cut the spending.

Among the factors that raise these are the levels of escalating inflation and stagnant wages, a Modern report From Kantar Consulting Market Research.

From the supermarkets to automobile companies, companies were feeling a pinch. Many of the largest companies in India, such as Hindustan Unileverand Maruti Suzuki And RLIANCE RTAIL – retail arm Accreditation industries – I reported the slowdown of revenues and the weakest profits last year, due to the request for urban demand.

Rift lines in home spending are also badly for foreign companies that compete for a share of future growth in India.

Periodic slowdown

The calm of India in consumer spending is partially owed by “periodic slowdown in consumption”, as families cut expenses to provide more loans or service that are incurred during the post -referee 19 period 19 Dhiraj Nim, a strategic expert in foreign currency exchange at Anz Bank, says the armies arm, Dhiraj Nim, a strategic expert in foreign currencies at Anz Bank.

“Of course, consumption will be weaker in this part of the course. Therefore, you don't have to worry too much because there are policy cranes to address this, such as cutting prices by RBI,” Nim told CNBC inside India. . Central Bank in India It is widely expected to reduce interest rates On February 7, at the first political meeting with Sanjay Malhotra as a ruler.

On this background, Nim says the government's move to reduce the tax “will not translate into a large boost to GDP growth.”

The marginal inclination of families for consumption (MPC) It is from 0.6 to 0.7, which means that their expenses will only increase by 600-700 billion Indian rupees, despite the tax concessions of Indian rupee of 1 trillion. MPC picks up the individual's willingness to spend, for every additional dollar of income. Reading 0.6 or 0.7 means that only 60 % -70 % will be spent per dollar.

Nim said that while reducing the percentage of financial deficit leads, this tax exemption will also lead to a decline in the government's routine expenses by 0.4 percentage of GDP, thus “compensating any completely more than tax mitigation.”

For him, the most effective approach will be to provide a “broad comfort for the economy”, for example, reduce fuel prices or adopt measures that reduce inflation and simultaneous increase in income. NIM adds that such measures will encourage the high costs that consumers wrestle Through income levels.

Is consumption enough?

The huge size of the consumption contribution to GDP in India is an sufficient reason to attract the attention of the government. However, with the growth of real GDP in India It is expected to reach the lowest level of four years From 6.4 % In the current fiscal year that ends in March, experts call for other measures to stop the slowdown.

Referring to economic policies in other countries such as China, Chisra from Morgan Stanley indicated that the rise in capital spending of the government (CAPEX) – besides consumption – can stimulate growth over the younger generation. This may involve investing in aspects such as creating job opportunities or city development, which would benefit from the number of the Millennium Millenniums in India's two -year.

“Additional growth to the GDP of investing in Capex is more than consumption. When CAPEX starts and creates jobs, income levels will also rise. This will ensure that the growth of consumption remains continuous as well.”

more 3 % of GDP It was allocated to Capex for the fiscal year of India from April. The proposed initiatives include a batch of foreign direct investment flows and a fund aimed at infrastructure and re -development initiatives in cities, which were included in the last budget.

Hope now is that these initiatives work alongside to create job opportunities, and ultimately improve productivity and wages. If it is well implemented, this long process can stimulate urban consumption-and feed the economic growth that affects it.

The Reserve Bank in India is likely to reduce interest rates. Economists expect The Indian Central Bank to announce the reduction of 25 Basis To the ribau rate during the policy meeting on Friday. If the bank reduces its prices, it will be the first trim in nearly five years. Investors will also check the RBI Sanjay Malhotra ruler data, which Assume the role in DecemberTo assess the bank's monetary policy.

The Bharatia Gata Party is expected to win the Delhi Association elections and the exit polls exhibition. If the Prime Minister of India Narendra Modi BJP forms the government In the country's capital, this will be the first time that the party has been done in 27 years. The current AADMI party rejected opinion polls, and questioned its accuracy.

India's budget gives priority to lowering the budget deficit. The Indian government aims to a Financial deficit for 4.4 % of GDP For the fiscal year 2025 to 2026, Finance Minister Nermalla Setharmann announced on Saturday. This goal of a deficit decreased by 4.8 % stipulated in the current year and from a peak of more than 9 % in the fiscal year 2020-2021. By shifting into debts to GDP from deficit to gross domestic product as a scale in the coming fiscal year, the government also said it plans to reduce its debt to 50 % of GDP by March 31, 2031.

US President Donald Trump invited Indian Prime Minister Narendra Modi on an official visit. The White House announced the invitation on Monday, With the scheduled Zara for February 10After the United States deported the illegal Indian immigrants to the country on the same day. Moody received a call with Trump on January 27, where the leaders discussed bilateral relations and trade relations. India also wants to avoid the American definitions that Trump has imposed so far on Mexico, Canada and China.

Volkswagen filed a lawsuit against the Indian government on tax demand of $ 1.4 billion. In September, India issued a $ 1.4 billion tax notice for VolkswagenSaying that the German auto industry paid 5-15 % less duties by classifying its imports of car components as “individual parts” of separate charges instead of “fully expelled units”, which had attracted a tax from 30 to 35 %. Volkswagen said in its file, which was reviewed by Reuters, that the tax dispute may offer its investment of $ 1.5 billion in India.

Indian stocks were traded last week, after showing signs of capture in the previous week. the Elegant 50 The index closed at 23,508.40 points per week ending January 31, an increase of 1.8 % compared to the previous week.

Indian government bonds return for 10 years increased to a slightly 6.78 % mark.

On CNBC TV this week, Anand Gupta, LEAD's wallet manager in Allianz Global, said that global political geography is “playing for India”, which is it Less exposed to the risks of trade war It ignited the Trump tariff. Towards, Gupta cited growth in the electronics manufacturing sector and moved away from China during the first period of Trump.

Meanwhile, the head of India's Indian Economy Prangulgol Bahandari said that the Indian government “is trying to do a lot of things” with its budget for 2025, which is “reducing the financial deficit, giving a significant increase in its consumption as well as adhering to its defense in Capex Thost”, however, “is something What he should give, “in those ambitious goals, Bahandari said, adding that if the New Delhi administration wants to reach its goal of deficit, It cannot give a big boost to the economy.