Income tax cuts a boost for India Inc, finance sector, says Moody’s, ETCFO
Reductions in personal income-tax rates proposed in the Union Budget 2025-26 will enhance middle-class purchasing power and consumption, which will be credit positive for corporates and financial sectors, Moody’s Ratings said on Tuesday.
This will further benefit domestic manufacturers, particularly those producing two-wheelers, passenger vehicles, and white goods, it said.
The rating agency has forecast a 6.6% gross domestic product (GDP) growth for 2025-26, indicating a recovery.
According to the government’s first advance estimates released in January, the economy is projected to grow by 6.4% in 2024-25. The government has set a fiscal deficit target of 4.4% of GDP for 2025-26 compared to the revised estimate of 4.8% for 2024-25.
Moody’s noted that the projected revenue loss of ₹1 lakh crore due to income-tax cut would slow fiscal consolidation, even though total spending as a share of GDP is projected to decline.
The government’s medium-term fiscal consolidation path targets central government debt at around 50% of GDP by 2030-31 from 57.1% in 2024-25.
However, Moody’s expressed concerns that these improvements might not be sufficient to change their view that India’s fiscal strength remains weaker than most of its Baa-rated peers.
