The Government GST Cuts Driving Consumption, Potential Boost GDP has said that the recent Goods and Services Tax (GST) rate cuts, implemented in late September, have been effectively passed on to consumers, leading to a visible uptick in household spending. Officials expect the surge in consumption to reflect positively in upcoming GDP growth figures.
According to the Finance Ministry, tax reductions on a range of goods — from consumer durables to household essentials — have led to lower market prices, encouraging stronger demand ahead of the festive season. Monitoring data showed that most manufacturers and retailers have complied with the rate pass-through, ensuring consumers benefit directly.
Preliminary indicators suggest a notable rise in retail sales, particularly in sectors like electronics, fast-moving consumer goods (FMCG), and automobiles. Retailers reported a 20–25% increase in festive-season sales compared with the previous year, reflecting stronger consumer confidence.
Officials said the GST rationalisation was designed not only to provide relief to consumers but also to stimulate broader economic activity. Higher consumption is expected to boost manufacturing and services, creating a multiplier effect across the economy.
While some concerns remain over the short-term impact on tax revenues, the government believes that increased demand and business turnover will compensate for any loss in collections. The Finance Ministry has expressed confidence that this consumption-led momentum will be visible in GDP data for the coming quarters.
The policy move is part of a broader effort to balance fiscal stability with growth, as the government focuses on keeping inflation moderate while supporting domestic demand and private investment.
