Firms pin hopes on new tax regime to revive mass demand after prolonged slump

Time of India

29-04-2025

Companies anticipate increased demand due to income tax relief starting in April. This could boost consumption, especially in tier-2 and tier-3 markets. Hindustan Unilever expects consumers to either spend more or save more. Honda Motorcycle & Scooter India foresees a positive shift in entry-level demand. Joy Personal Care anticipates a more positive demand environment.
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( Originally published on Apr 29, 2025 )
New Delhi: Companies are hoping the income tax relief under the new regime that kicks in with salaries for April could be a fillip to spark greater demand, especially for the mass priced categories after a five-quarter downturn.Executives said they expect this to translate into better demand starting May, particularly in tier-2 and -3 markets, which have been core growth drivers at a time when urban demand has been slowing."The fact is there will be more money in the hands of consumers. With this, they may boost consumption or increase savings - we will have to wait and see how it will eventually trickle down," said Rohit Jawa, chief executive of India's largest consumer goods company Hindustan Unilever , maker of Pears soap and Brooke Bond tea.Union finance minister Nirmala Sitharaman had announced in her Budget Speech on February 1 that individuals earning up to Rs 12 lakh annually will no longer have to pay any income tax under the new tax regime.Companies selling mass-priced products, especially, say they are hopeful of an uptick in demand. "With increased disposable income, we expect demand in the entry-level segment to see a positive shift," said Yogesh Mathur, director, sales & marketing, Honda Motorcycle & Scooter India Semi-urban markets, or tier-2 and three markets, have been called out by categories such as packaged food, fashion, e-commerce and diners as core economic growth drivers amid higher aspirational demand and last mile online delivery platforms."As a mass brand with affordable pricing, we foresee a positive shift in buying behaviour," said Sunil Agarwal, chairman of Joy Personal Care (RSH Global), which makes moisturisers, body lotions, sunscreens and face washes."The relief is expected to create a more positive demand environment, especially by putting additional disposable income in the hands of middle-income consumers, which together contribute to nearly 90% of our overall business," Agarwal added.Some other executives said they were cautious about whether the tax relief would steer demand or consumers may choose to improve their savings.More disposable incomes could translate into spending across services such as essentials, cars, or education of children, executives said."People are not going to put all their income tax savings aside and use it to buy a car. They have other priorities also. These are small households. For most small households, a car isn't the top priority-they have children and many other requirements," said R C Bhargava, chairman of Maruti Suzuki Bhargava added that with the price of cars having gone up by '80,000-90,000, the amount people save through tax exemptions may not be enough, "especially considering their other household expenses."In addition to the tax relief on incomes up to Rs 12 lakh, tax payers in the Rs 12-24 lakh bracket have been given the option to save up to Rs 1.1 lakh annually within the tax slab tweaks. The TDS (Tax Deducted at Source) threshold on rental income has been raised from Rs 2.4 lakh to Rs 6 lakh.