GST Cuts, Consumption Boosts: Floor for Growth or Just a Cushion?

1. Main Street’s Cheer, Dalal Street’s Pause

The reform tilts in favour of staples & low-ticket consumption. Short-term fiscal impact is modest
at about ~₹25,000 Cr (~0.1% of GDP) in FY26, but FY27 could see a deeper imprint: ~₹2 Lakh Cr
(~0.5% of GDP), depending on fiscal consolidation choices. Insurance and small cars, the categories
where tax cuts are large, could benefit the most.

2. Policy Floor, A Blunt Growth Catalyst

Two slabs (5% & 18%) + removal of compensation cess + correction of inverted duty structures =
easier GST regime. Expect higher compliance, lower disputes, and smoother input credit chains.

3. Simplification = Compliance Dividend

With direct tax growth sluggish in FY26 and GST cuts kicking in, revenues are under strain. Net
direct tax collections till August for FY26 were ₹6.64 trillion, down 3.95% from ₹6.91 trillion in the
same period last year. Add to this the front-loaded capex (April–July FY26: Capex stood at
₹3.5 trillion, up 35%yoy), and the remainder of FY26 could see sharper capex trims, a risk for infra linked listed sectors.

FMCG & Staples: Demand Trigger or Margin Lever?

Rate cuts could revive consumption in struggling staples & FMCG. If firms absorb part of the GST
cut, expect margin gains; if passed on, volume growth is the lever. Q3FY26 FMCG volumes will be
the litmus test. For brown goods, household balance sheets hold the key for now. A marginal bump
up in FY26 is a possibility but larger impact could be back ended,

5. FMCG & Staples: Demand Trigger or Margin Lever?

Tax cuts + liquidity infusion + spending boosts together put a floor under growth. But global
headwinds limit upside. This is incremental cushioning, not a GDP game-changer. More reforms
may be required.