According to a survey, the last holiday season saw a significant increase in consumer demand and factory output due to the rationalization of the GST rate. In the upcoming quarters, maintaining this increase would depend on both industry-specific dynamics and broader economic conditions. Manufacturing recovered as businesses stocked up ahead of festivals, according to credit rating agency ICRA, with consumer durables exhibiting a notable sequential and year-over-year increase. “While the GST rationalisation may support demand for regular use or small-ticket items after the festive season, the sustenance of the buoyancy in demand for big-ticket items remains to be seen,” it stated.
The research further stated that “a good part of the GST rate cut benefit is going to be neutralised by the star labelling requirements to be introduced from January 2026.” According to the ratings agency, the shift in the holiday calendar contributed to the year-over-year growth in GST e-way bill generation, which decreased to 8.2% in October from 21% in September. According to the research, the GST cuts have had a noticeable effect on prices because the core consumer price index, which does not include gold, was flat sequentially in October as opposed to the usual monthly increase of 0.4–0.5%. It further stated that by reducing the cost of necessities and increasing affordability in important industries, GST rate reductions have lessened the tax burden on both consumers and businesses.
Two-wheelers, passenger cars, tractors, commercial vehicles, fashion retail, insurance, room air conditioners (RAC), low-cost hotels, cement, fertilizer, specialty chemicals, and upstream oil and gas were among the major businesses whose effects were assessed in the report. Earlier this month, a Morgan Stanley analysis stated that macro indicators are still solid, providing policymakers with plenty of leeway to promote growth through fiscal and monetary policies. It further stated that GDP is likely to grow at a rate of 6.5% in FY 2027–2028 due to the anticipated expansion of both rural and urban consumption.
