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Union Budget Set to Propel Consumption Sectors, Open New IT Horizons with DeepSeek AI

Union Budget 2025 is set to boost consumption, with key investments in AI, infrastructure, and emerging sectors like EVs, tourism, and toys, paving the way for long-term growth.

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Union Budget 2025

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The Union Budget 2025 is set to drive growth in the consumption sector while also offering long-term benefits for urban housing, insurance and defence industries, as per a new report by smallcase, a leading platform for investment products in India.

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Key Boost to Consumption and Infrastructure

The Union Budget's focus on increasing the capital expenditure (capex) allocation is expected to give a strong push to the consumption sector. Over the past decade, the capex budget has grown at a 15% CAGR, and projections suggest that by 2030, it will surpass $1.2 trillion. This boost will likely benefit banks and specialised infrastructure Non-Banking Financial Companies (NBFCs) that focus on long-term infrastructure projects.

DeepSeek AI and the IT Sector's Expanding Market

The rise of DeepSeek AI is opening up a large market for the IT industry. However, while IT companies are an attractive investment option, the report highlights concerns about near-term growth rates and valuations. Thanks to DeepSeek's potential to reduce the cost of developing new AI models by up to 50 times, small and mid-sized companies, as well as startups, now have the opportunity to create AI-based products. This could significantly expand the market for Indian IT services in the coming years, although there are some uncertainties surrounding immediate growth prospects.

Promising Growth in EVs, Tourism and the Toy Industry

The Union Budget also directs focus towards emerging sectors such as Electric Vehicles (EVs) and tourism, especially religious tourism, which could benefit from tax incentives. The toy industry, with a market size of $400 billion globally, is also expected to see significant growth due to new allocations aimed at boosting manufacturing in India. According to Ambareesh Baliga, a veteran market expert, this could lead to substantial growth in the next 10-15 years, further diversifying the economy.

At a broader level, for long-term market and currency growth, the economy needs to maintain a 7.5-8% growth rate.

Budget Artificial Intelligence
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