GUWAHATI: Finance Minister Nirmala Sitharaman on Saturday, February 8, stated that the income tax relief announced in the Union Budget 2025, coupled with the Reserve Bank of India's (RBI) recent repo rate cut, is expected to accelerate consumption recovery in the economy.
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Speaking at a press conference after her post-Budget meeting with the RBI’s Central Board of Directors, Sitharaman noted that early feedback from business leaders and industry experts indicates a positive outlook. She highlighted that orders for fast-moving consumer goods (FMCG) for the April to June period are already being placed, signaling a potential revival in consumption demand.
The 2025 Union Budget, presented on February 1, increased the income tax exemption limit from ₹7 lakh to ₹12 lakh, a move that is set to take nearly one crore middle-income taxpayers out of the tax bracket. While this decision is projected to result in a revenue loss of ₹1 lakh crore in direct taxes and ₹2,600 crore in indirect taxes, the government anticipates that the additional disposable income will be redirected into consumption, savings, or investments, thereby stimulating economic activity.
In addition to the tax relief, the RBI also announced a 25 basis point cut in the repo rate, lowering it from 6.5% to 6.25% on February 7. This marks the first rate cut in nearly five years and is expected to reduce borrowing costs, further encouraging spending and investment.
Sitharaman also confirmed that the Union cabinet has approved the new income tax proposal, which is set to be introduced in the Lok Sabha in the coming week. The proposal will undergo committee scrutiny before implementation, though a specific timeline for its rollout has not yet been provided.