Union Budget 2025: What India’s E-Commerce Industry Expects for Growth and Innovation

India's e-commerce sector experienced significant growth in FY24, reaching a market value of $147.3bn. The sector is projected to grow at a compound annual growth rate (CAGR) of 18.7% to $292.3bn by 2028, according to analytics company GlobalData.

The quick commerce segment saw exponential growth, with its Gross Merchandise Value (GMV) rising from $500mn in FY22 to $3.34bn in FY24, growing at an annual rate of 150%. Quick commerce platforms like Zepto and Blinkit are growing rapidly at a 25% CAGR, capturing 8% of the urban grocery market in 2023, up from 3% in 2021. Tier 2 cities now account for 30% of their sales.

Budget 2024 for E-Commerce

The Union Budget 2024 provided a boost to the e-commerce sector, with Finance Minister Nirmala Sitharaman announcing the establishment of e-commerce export hubs through public-private partnerships. These hubs, operating under a streamlined regulatory and logistics framework, will offer services like export clearance, testing, packaging, customs clearance, and warehousing. The creation of such hubs was also recommended in the previous year’s Foreign Trade Policy.

The finance minister also announced a reduction in Tax Deducted at Source (TDS) for operators from 1% to 0.1%. TDS applies to payments like rent, salary, and professional fees.

The e-commerce industry stakeholders showed optimism about last year’s budget and brought in good results for the sector. Similarly, the industry will be looking forward to this year’s budget with the hope of relaxation or a boost in certain segments that could directly and indirectly affect the industry.

Also Read: First E-commerce Export Hub May Start Operations in March: DGFT

E-Commerce Sector Awaits GST Cuts

The e-commerce industry anticipates that the Budget 2025 will include a reduction in Goods and Services Tax (GST) rates on mass-consumption FMCG products, such as personal care and packaged foods, from 18% to 12%. This move is expected to result in an 8% increase in volume sales, boosting tax collections and contributing a 0.5% rise in GDP, according to Deloitte.

The rationale behind this is the price sensitivity among lower-income groups, which has led to a decline in mass-segment consumption. Lowering GST would help address this issue, support small-scale FMCG manufacturers, and improve the affordability of essential goods, aligning with the government's focus on inclusive growth.

Priyanka Duggal, Partner, Grant Thornton Bharat finds GST structure as one of the critical areas that the government must focus on to boost FMCG and e-commerce growth.

She said, “With the upcoming Union Budget, the sector has emphasized the need for an enabling environment that fosters growth, sustainability, and innovation. A critical area of focus is rationalizing the tax and GST structure. Furthermore, businesses are rapidly adopting technology to boost efficiency and competitiveness. Direct tax incentives for AI, IoT, tech enablement investments, along with accelerated deductions and tax rebates, could accelerate modernization and strengthen digital infrastructure, driving innovation and growth.”

Income Tax Exemptions

The e-commerce industry expects Budget 2025 to include measures that increase disposable income by relaxing income tax exemptions. Specifically, the basic income tax exemption limit under the old regime could rise from ₹2.5 lakh to ₹3.5 lakh, and the standard deduction under the new tax regime may increase from ₹50,000 to ₹75,000.

This could lead to a 5-7% increase in disposable income for middle-income households, resulting in a 6% rise in consumer spending on FMCG and essential goods, contributing to a 0.7% GDP growth. Given that consumption constitutes over 60% of India's GDP, this tax relief aims to revive demand, particularly from the urban middle class, which has been cautious due to stagnant incomes and high inflation.

Another measure that can increase disposable income is through effective job creation. On this, Siva Balakrishnan, founder and CEO of Vserve said, “One of the primary expectations – government's emphasis on skill development and job creation. With the labour force participation rate (LFPR) steadily rising and unemployment rates dropping, these policies are likely to boost the e-commerce ecosystem. A skilled and employed workforce equals more discretionary income, which strongly correlates with growing online buying and service demand.”

Also Read: Enabling Startups to Thrive: How E-Commerce and Policy Support Are Powering India’s Economic Future

AI & Digital Investments

The e-commerce sector is hopeful about the government’s focus on expanding the investments in AI and digital infrastructure to drive increased internet penetration and digital literacy, especially in Tier 2 and Tier 3 cities. This would align with the sector’s goal of broadening its consumer base by reaching underserved regions and enabling more people to shop online.

By supporting digital infrastructure and literacy programs, the budget can empower these areas to engage in e-commerce, creating greater market inclusivity, boosting online sales, and stimulating economic growth through expanded digital access.

Improved Artificial Intelligence (AI) investments will enable start-ups including e-commerce or quick commerce firms to enhance their services, thus boosting the growth of the sector.

Chirag Taneja, Co-founder and CEO of GoKwik said, “Investments in AI-driven technologies and a robust digital infrastructure can help brands scale seamlessly while contributing to India’s ambition of becoming a $5 trillion economy. We also need to simplify compliance for MSMEs—steps that can reduce inefficiencies and enhance global competitiveness for Indian eCommerce.”

Apart from these aspects, e-commerce will also keep an eye on infrastructure development, domestic manufacturing (Make in India), e-commerce logistics, UPI or digital payments and reduction in import duties during the budget 2025 announcements.