Summary:

The Union Budget 2025-26 raised the income tax exemption limit to Rs. 12 lakh (US$ 13,775.18), boosting demand for two-wheelers and passenger vehicles. The tax relief will benefit middle-class taxpayers by Rs. 1,00,000 crore (US$ 11.48 billion), increasing discretionary spending, particularly in metropolitan areas. This increased buying power is likely to boost automotive sales, with the two-wheeler industry expected to grow at a 13% CAGR from FY25 to FY27.

Two-wheelers and tractors are forecast to grow at a robust 13-15% CAGR, while passenger vehicles are expected to maintain a solid 9% CAGR. The budget’s focus on fiscal consolidation may allow the Reserve Bank of India to adopt a more accommodative stance at its February 2025 Monetary Policy Committee meeting, potentially boosting economic growth and consumer spending. If conditions remain favorable, the automotive industry could experience significant growth.

Source: IBEF (Link)

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