Are the Budget measures in terms of income tax relief and consumption boost helping revive sentiment? Well, the Finance Minister Nirmala Sitharaman, in an exclusive interview with Financial Express, has confirmed that sentiment is indeed turning positive in urban India in terms of consumption.
“From April, there have clearly been signs of the (positive consumer) sentiment playing out (thanks to the income tax reliefs),” she said while elaborating on concerns over the sharp slowdown in sales growth of a leading FMCG company, which recently hit its lowest level in a decade.
Speaking about urban consumption trends, Sitharaman said the economy is witnessing a kind of “seesaw” pattern. She highlighted that the tax reliefs have boosted confidence among a wide range of people, including the self-employed. “The fact that you don’t need to pay tax, or pay as much as you used to, has actually weighed on the minds of people from a wide spectrum of vocations,” the Finance Minister said.
Tax reliefs lifting consumer confidence: FM Sitharaman
In Budget 2025, announced on February 1, Sitharaman introduced the new tax regime under which individuals earning up to Rs 12 lakh annually will not pay any income tax. For salaried taxpayers, this exemption extends up to Rs 12.75 lakh, as they are also eligible for a standard deduction of Rs 75,000.She reiterated that the tax reliefs have boosted confidence among a wide range of people, including the self-employed and small business owners.
ITC’s FMCG growth hits decade low
FMCG major ITC has reported a modest growth of 4.6 per cent in FY 2024–25 in its FMCG segment. Consumer spending reached approximately Rs 34,000 crore, marking the company’s slowest growth in more than a decade — a significant drop compared to its typical annual growth rates of 9–21 per cent over the past ten years.
The current slowdown is being attributed to muted demand, deep discounting on quick-commerce platforms, and higher input costs such as wheat, edible oil, and cocoa. Rising competition from regional brands has also added pressure.
Urban demand slows in March quarter
The FMCG industry registered an overall growth of 11 per cent in the March quarter, driven by a 5.1 per cent increase in volume and a 5.6 per cent rise in prices. “A higher unit growth than volume growth indicates a preference shift towards smaller packs among consumers,” said NielsenIQ (formerly known as Nielsen).Sitharaman expressed confidence that these measures will help revive urban demand. “I think that this will actually have a (positive) impact on urban consumption,” she said, hinting at a possible turnaround for sectors like FMCG that are sensitive to consumer sentiment.
CPI inflation at six-year low
Her remarks come at a time when inflation appears to be well under control. India’s retail inflation, as measured by the Consumer Price Index (CPI), eased to a six-year low of 2.82 per cent in May 2025, staying below the Reserve Bank of India’s 4 per cent target for the fourth consecutive month. The decline was largely driven by easing food prices, which has created a more favourable environment for consumer spending. Urban CPI inflation stood at 3.07 per cent in May, reflecting a relatively benign price environment that could further support a recovery in discretionary consumption.
Hope for FMCG demand recovery
Sitharaman expressed confidence that these economic measures, including tax reliefs and moderating inflation, will help stimulate demand in urban India. “I think that this will actually have a positive impact on urban consumption,” she said, pointing toward a potential revival in sectors like FMCG that rely heavily on consumer sentiment.