Experts Discuss Multiplier Effect on Growth
A panel of experts at the India Today-Business Today Budget Roundtable 2025 discussed the potential multiplier effect of the Union Budget 2025-26 on the Indian economy. The budget, presented by Finance Minister Nirmala Sitharaman on February 1, was lauded for its focus on boosting domestic demand.
Demand as the Key Driver of Growth
Economist Rumki Majumdar of Deloitte highlighted the importance of stimulating demand to spur economic growth. She noted that inflation has primarily been a supply-side issue, with muted demand. "The budget has tried to address this by pushing consumer demand, which will send a signal to private investors and lead to a more sustainable outcome," she explained.
Majumdar emphasized the multiplier effect of increased consumer spending, leading to more investment and job creation. "This virtuous cycle is what the budget aims to achieve," she added.
Investment Hinges on Demand
Dhiraj Nayyar, Chief Economist at Vedanta Resources, stressed the role of demand in driving investment. "If demand is weak, even corporate tax cuts may not attract investment. However, tax cuts for individuals can lead to increased spending, boosting demand and potentially triggering a virtuous cycle of private investment," he stated.
Inflationary Impact
Abheek Barua, former Chief Economist of HDFC Bank, acknowledged the potential inflationary impact of the budget on certain consumer products. "FMCG companies may see an uptick in margins due to inflation. However, the budget cannot be broadly classified as inflationary," he clarified.
Overall, the panel of experts expressed optimism about the potential of the Union Budget 2025-26 to stimulate economic growth through its focus on boosting domestic demand. The multiplier effect of increased consumer spending and investment is expected to play a crucial role in driving this growth.