Amidst concerns over a slowdown in the economy and moderation in urban consumption, the Centre is likely to continue indirect policy support measures to boost demand rather than any direct sops.
Senior policymakers who are preparing the Union Budget 2025-26 have ruled out the need for direct sops or cash subsidy schemes to boost demand at this point and believe that current policy measures are more than sufficient.
“The Centre already has several schemes that provide a direct cash transfer. Several states are also giving out cash through various schemes aimed at women. At present, there does not seem any need for a fresh scheme for cash transfer to boost demand,” said a senior official familiar with the development.
Sources noted that urban demand has been moderating in recent months but pointed out that this is often cyclical in nature and is likely to swing back up again next year. “While inflation has been a concern, we must remember that urban households had made significant purchases during the pandemic. Those consumer durables and electronics have a certain shelf life and households will start making these purchases again when these goods have to be replaced,” noted the source.
The government also remains hopeful of a continued pick up in rural demand with good monsoons and expects overall demand to pick up in the coming months after the mixed trends in the earlier festive months.
Credit ratings agency S&P Global has revised Indias growth forecast downwards to 6.7% in FY26 from its previous forecast of 6.9%. While it has maintained the growth forecast for the current fiscal at 6.8%, it has however noted with concern that high interest rates and a lower fiscal impulse have tempered urban demand. “While purchasing manager indices (PMIs) remain convincingly in the expansion zone, other high-frequency indicators indicate some transitory softening of growth momentum due to the hit to the construction sector in the September quarter.
The Finance Ministry’s Monthly Economic Review however held that amidst external uncertainties, “India quietly holds its ground”. After a brief moderation over the monsoon months, economic activity firmed up in October, it said, adding that demand continues to grow steadily as seen by various high-frequency indicators. However, RBI surveys paint a more cautious picture of urban consumers’ perceptions of employment conditions and manufacturers’ hiring sentiments, the review said.