Is the budget’s tax relief enough? Saurabh Mukherjea weighs in
However, Mukherjea argues that the true catalyst for a stronger consumption cycle lies in job creation rather than short-term tax relief. The multiplier effect of the tax cut is estimated at 1.1, which is not substantial enough to drive a major economic transformation.
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A boost in savings could also enable faster credit growth, benefiting both banks and non-banking financial companies (NBFCs).
Despite this, stock market valuations remain high, which raises concerns about sustainability. Unless there is a significant recovery in earnings growth in FY26, the Indian markets may face challenging quarters ahead.
Mukherjea believes that while tax relief offers some support to consumption, it is not substantial enough to alter long-term investment decisions. Instead, sustainable growth will depend on broader economic factors such as job creation, infrastructure development, and global market trends.