GST cuts fuel domestic demand, cushion export hit: HSBC

GST rate cuts have led to retail price reductions and increased household spending, which have offset the tariff-related impact on India’s exports, a report said on Tuesday. “Overall manufacturing output continued to rise, with the fall in new export orders fully offset by a rise in domestic orders. A spurt in input purchases suggests that manufacturing could remain strong in November too,” the report from HSBC Global Investment Research noted.

Based on pick-up in agriculture, manufacturing, construction, growth for Q3 CY25 is tracking 7.2-7.4 per cent, the firm said.

The overall exports remained steady in spite of a dip in exports to United States due to tariff-related concerns, the report said.

The research house, however, maintained that growth may see some softness in the second half of the current fiscal year due to fiscal consolidation pressures.

GST rates were reduced for around 375 items on September 22, the report said, adding that government tracking indicates that companies lowered prices by more than what was warranted by GST rate cuts for about half of the items monitored.