Amid worries about a sluggish economy and a slowdown in urban consumption, the Centre is anticipated to uphold indirect policy support measures to stimulate demand instead of offering direct incentives. Policymakers preparing the Union Budget 2025-26 have dismissed the idea of introducing direct sops or cash subsidy schemes to bolster demand, stating that current policy initiatives are deemed sufficient for now.
A senior official familiar with the developments mentioned that there are already multiple schemes at both the Centre and state levels that facilitate direct cash transfers to individuals. Although urban demand has shown signs of moderation in recent months, it is viewed as a cyclical trend that is expected to bounce back next year. The rationale behind this expectation is that urban households made significant purchases during the pandemic, particularly consumer durables and electronics, which will need replacement in due course, thereby reviving demand.
The government remains optimistic about a potential increase in rural demand fueled by favorable monsoons, and it anticipates an overall uptick in demand trajectory in the upcoming months post-uneven trends witnessed during previous festive periods. Despite credit ratings agency S&P Global revising India's growth forecast downward to 6.7% for FY26, citing concerns about high interest rates and a subdued fiscal impulse affecting urban demand, other indicators like the continuously expanding purchasing manager indices (PMIs) suggest a positive growth trajectory. The Finance Ministry's Monthly Economic Review indicated that India maintained steady economic activity with growing demand as reflected by various high-frequency indicators, even though RBI surveys painted a more cautious outlook regarding urban consumers' employment perceptions and manufacturers' hiring sentiments.