GST Reforms May Cool Inflation, Boost Festive Consumption: Experts

The government’s proposed next-generation GST reforms could bring significant relief to consumers and the economy in the coming months. Announced by Prime Minister Narendra Modi in his 79th Independence Day address, these reforms are expected to be rolled out by Diwali this year, potentially reshaping India’s consumption outlook.

Economists and brokerages believe that the changes may soften inflation, reduce fiscal pressure, and raise the chances of an RBI rate cut as early as October. Experts estimate that lower indirect taxes on consumer goods could reduce CPI inflation by 40–80 basis points (bps), offering much-needed price relief.

Festive Demand Boost Ahead

The timing of the reforms is crucial. H2FY26 typically witnesses a surge in demand due to the festive season, and the expected tax relief could provide strong support to consumer spending, particularly in segments like consumer durables and household goods. A report by Morgan Stanley has pegged CPI inflation to ease by nearly 40 bps over the coming quarters, further strengthening this outlook.

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Market Insights & Update

Market experts say that if inflation moderates as expected, RBI could have room to ease monetary policy, which may boost credit growth and investor sentiment. Sectors like FMCG, consumer durables, and retail are likely to benefit the most, while equity markets could see positive momentum from improved consumption trends.

Overall, GST 2.0 is being seen as a key policy reform that could balance inflation, stimulate demand, and open doors for a supportive monetary stance by the RBI.

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