Domestic consumption on the rise due to GST slash

The GST rate rationalisation gave a ‘measurable’ boost to consumption, and the Indian economy is on a stable footing to navigate risks and maintain growth momentum through the current fiscal, a Finance Ministry report said on Thursday. The Finance Ministry’s Monthly Economic Review for October said that with inflationary pressures easing and recent tax reforms boosting household disposable incomes, the near-term consumption outlook appears increasingly positive.

Retail inflation has reached an all-time low in the current series, dropping to 0.25 per cent in October 2025, down from 1.44 per cent in September 2025. The decline can largely be attributed to the complete impact of reduced GST rates, a favourable base effect, and significant falls in food inflation, the ministry said.

“The rationalisation of GST rates has provided a measurable boost to consumption, as reflected in the strengthening of high-frequency indicators, including higher e-way bill generation, record festive-season automobile sales, robust UPI transaction values, and a notable rise in tractor sales,” said the October Monthly Economic Review. It said that these developments point to broad-based improvements in demand conditions across both urban and rural segments.

“The full impact of GST rationalisation on spending behaviour would become more evident over the next two quarters,” it added. Effective September 22, the GST rates on about 375 items were slashed, making mass consumption items cheaper. Also, GST rates of 5, 12, 18, and 28 per cent have been clubbed into two rates of 5 per cent and 18 per cent, resulting in a reduced price of 99 per cent of daily use items.