A new report on Tuesday pointed out that the upcoming GST 2.0 reforms, coupled with improving rural incomes and softening inflation, might lead to a huge resurgence in India's consumption cycle.
As per numbers put together by Wright Research, an investment manager on smallcase, India's consumption cycle—which has been languid over the last couple of years—has bottomed out and is now headed upwards.
If the GST 2.0 is rolled out by October, aligning with the festival season, it can bring down the prices for consumers, increase demand, and push households to spend more.
The report also observes that some of the products now levied at 12 per cent—e.g., processed foods, cheap footwear, and certain wellness products—could be shifted to the 5 per cent category.
This has the potential to bring down essentials of daily consumption and encourage switching from unbranded to branded, both of which have a significant demand switching potential," the report said.
For household appliances of high value, GST on air conditioners, big TVs might decline from 28 per cent to 18 per cent, leading to prices that are about 8 per cent lower and enhancing affordability in Tier-2 and Tier-3 cities.
Likewise, a GST cut on cement, which is presently charged at 28 per cent, would reduce expenses for smaller home improvement projects as well as larger scale building works.
“GST 2.0 represents one of the most pro-consumption policy moves in recent years. By reducing prices in everyday categories and big-ticket durables alike, the reform could accelerate demand just as rural incomes and inflation trends are turning favourable,” said Sonam Srivastava, Founder of Wright Research and investment manager on smallcase.
Sector outlook appears promising. FMCG firms are expected to record revenue growth of approximately 10 per cent in FY26, while consumer durables may grow more than 21 per cent subject to the speed at which reform is adopted.
Cement companies will benefit the most, with expectations for EBITDA growth over 40 per cent and profit growth nearing 80 per cent.
Digital platforms are likely to record revenue growth of 35-40 per cent as MSMEs keep adopting online solutions, while oil marketing companies can anticipate better cash flows owing to softening crude prices.
A recovery is already in the making. During Q1 FY26, FMCG leaders, fast-food chains, and paint companies reported volumes expansion, while retailers in small towns are also seeing quicker sales momentum, the report further mentioned.
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