GST Rate Cuts Power Festive Demand And Manufacturing Output

New Delhi, Nov 24: GST rate rationalisation has significantly boosted consumer demand and manufacturing output during the recent festive season, according to a new report. The sustainability of this growth will depend on broader economic conditions and industry-specific dynamics in the coming quarters.

Key Takeaways

• GST cuts boosted festive demand and manufacturing output
• Core CPI remained flat in October due to tax reductions
• Growth in GST e-way bill generation eased to 8.2% in October

Manufacturing Rebounds Ahead of Festivals

Credit ratings agency ICRA reported that manufacturing activity rebounded as companies stocked up ahead of festivals. Consumer durables showed significant sequential and year-on-year growth.

Big-Ticket Demand Uncertain

“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 said.

Star Labelling To Offset Benefits

The report noted that upcoming star labelling requirements from January 2026 could neutralize a significant portion of the GST rate cut benefits.

GST E-Way Bill Growth Eases

Year-on-year growth in GST e-way bill generation slowed to 8.2% in October from 21% in September. The ratings agency attributed this partly to shifts in the festive calendar.

Impact on Core CPI

The GST cuts have visibly impacted prices, with the core consumer price index (excluding gold) remaining flat sequentially in October. This contrasts with the typical monthly increase of 0.4-0.5%. The tax reductions have eased the burden for both consumers and businesses by lowering prices on essentials and improving affordability across key sectors.

Sector-Wise Assessment

The report evaluated impacts across multiple industries including:

• Automotive (two-wheelers, passenger vehicles, commercial vehicles)
• Consumer goods (fashion retail, room air conditioners)
• Infrastructure (cement, fertiliser, specialty chemicals)
• Energy (upstream oil and gas)
• Services (insurance, budget hotels)

Macro Indicators Stable

A separate Morgan Stanley report indicated that macro indicators remain stable, providing policymakers with room to support growth through both monetary and fiscal measures. With rural and urban consumption expected to expand, GDP is projected to grow at 6.5% in FY 2027-28.