GST rate cuts: FM says demand will sustain even after the festive season

The cuts in GST rates that came into effect from September 22 have led to record sales of automobiles, consumer durables and FMCG products during Navratri and the ongoing festive season, Finance Minister Nirmala Sitharaman said on Saturday, adding that consumer demand is expected to continue on a sustained basis even after the festive season.

The Minister of Finance stressed that “the demand will continue even after the end of the festive demand. Consumers will benefit from it on a daily basis and for purchases that may be made from time to time. The consumption story will continue.”

While she did not give any estimates on the expected boost to the economy or consumer demand, she also noted that the festival season in India continues till Sankranti, which is mid-January and one should wait for consumption figures till then.

The economic survey expected the economy to grow in the range of 6.3% to 6.8% this fiscal year. However, since the GST rate cut, the Reserve Bank of India has revised India’s growth forecast upwards to 6.8% from the previous 6.5%. The IMF also raised India’s GDP forecast by 0.2 percentage points to 6.6% in 2025.

The minister also stressed that the reduction in the GST rate was independent of the increase in US tariffs, and said that this practice has been going on for a year and a half.

It also said that the GST cuts have been passed on to consumers in most cases, and the prices of 54 commodities are being monitored by the Central Board of Indirect Taxes and Customs.

“We are convinced that the benefits accrue to consumers regarding each such product. We are convinced that the rate change reaches the general public,” she added.

In fact, the price reduction of items including shampoo, bed nappies, cutlery, kitchen utensils and toys such as tricycles, solar cookers and umbrellas was slightly higher than the reduction in GST.

In some cases, such as butter, ghee and cheese, the portion change is slightly lower and the government is working with manufacturers to discuss this.

There is also a smaller than expected decline in Portland cement prices.

The government received 3,169 complaints regarding GST rate cuts, of which 3,075 were sent to CBIC Bank and 94 were resolved by the Consumer Affairs Department.

Meanwhile, addressing the press conference, Ashwini Vaishnao, Minister of Electronics, IT, Railways, Information and Broadcasting, said that sales of electronic items during Navratri were 20-25% higher compared to the last Navratri.

He said the increase in demand for electronic goods has also helped electronic manufacturing which has grown at a double-digit CAGR and currently employs 25,000 people.

India’s smartphone exports to the US have surpassed China’s exports, he said, adding that 20% of US smartphone manufacturing is now in India.

Food inflation has also come down due to GST reforms, he said.