Kunal Kundu of Societe Generale highlights that India's Goods and Services Tax (GST) data and Index of Industrial Production (IIP) figures indicate a soft consumption backbone, with post-September 2025 GST rate cuts failing to generate a broad-based demand uplift. The gains from these rate cuts have been concentrated primarily in motor vehicles and select categories, rather than across the wider consumption basket that typically drives domestic GST buoyancy [1].
The IIP data provides an independent check on household demand trends, revealing that consumer durables—products favored by middle and upper income households—have outperformed consumer non-durables, which are more closely tied to everyday consumption. Specifically, during FY26, consumer goods production rose 2.45% year-on-year, but this growth was mainly led by consumer durable goods, while production of consumer non-durable goods remained flat, indicating unchanged production in the category that tracks everyday consumption [1].
Kundu notes that the overall demand impulse has not been strong enough to materially lift net domestic GST once refunds are stripped out. This narrow demand response suggests that the broad consumption backbone remains soft, and the current environment is not conducive to a demand-led GST upswing [1].
CONCLUSION
India's GST rate cuts have resulted in a limited and concentrated demand response, with gains mostly in motor vehicles and consumer durables. Everyday consumption, as tracked by non-durables, remains subdued, signaling a soft consumption backbone. This environment is unlikely to support a broad-based GST upswing in the near term.