IT-BT Budget Round Table 2025: Experts say Budget will have multiplier effect on economy

A panel of experts at the India Today-Business Today Budget Roundtable 2025 on Tuesday said that the union budget 2025-26, which was presented by the finance minister Nirmala Sitharaman on February 1, will have a multiplier effect in terms of growth for the Indian economy.

During a panel discussion titled ‘State of the Economy,’ Rumki Majumdar, an economist at Deloitte, said inflation has so far been a supply-side problem, whereas demand remained muted. “Right now, we need the demand to spur growth. Given the uncertainties that we are facing right now, domestic demand is our best bet. For that, we need consumer demand and investment demand to pick up and that’s what the budget has tried to address. Push the consumer demand, that will give a signal to private investors and that will result into a more sustainable result from the private sector,” says Majumdar.

According to Majumdar, the total boost in the budget is likely to be a very small fraction of the GDP. “But what we are missing is the multiplier effect. Because the consumer will spend,  it will result in more investment and it will need more employment creation. This is what we need right now. The virtuous cycle will kick in. And that’s what the budget has tried to do,” says Majumdar.

Dhiraj Nayyar, chief economist at Vedanta Resources, says that investors respond if there is demand, either internal or external. "If the demand is muted, despite a corporate tax cut, investment may not come. However, if you cut taxes, the individuals are likely to spend that money, and then you would have an immediate positive effect on demand, which may increase the private investment and spur the virtuous cycle,” says Nayyar.

Notably, when asked if the budget is non-inflationary, Abheek Barua, former chief economist of HDFC Bank, said that the budget will likely be slightly inflationary for some consumer products. “The FMCG companies will perhaps witness an uptick in margin in consecutive inflation. But one cannot say that the budget is broadly inflationary,” says Barua.