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

The cuts in the rates of the goods and services tax 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 consumption demand is expected to sustain on a durable basis even beyond the festive season.

"The demand will sustain even after the festive demand. It will benefit consumers on a day-to-day basis and on purchases that may be once in a while. The consumption story will continue," the finance minister underlined.

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

The Economic Survey had projected that the economy would grow in the range of 6.3% to 6.8% this fiscal. However, since the GST rate cuts, the Reserve Bank of India has revised India's growth forecast upwards to 6.8% from the earlier 6.5%. The International Monetary Fund has also upped India's GDP forecast by 0.2 percentage points to 6.6% in 2025.

The minister also underlined that the GST rate cut was independent of the US tariff hikes and said the exercise had been going on for a year and a half.

She further said that GST rate cuts have been passed on to consumers in most cases and prices of 54 items are being monitored by the Central Board of Indirect Taxes and Customs.

"We are convinced that on every such item, benefits are passed on to consumers. We are convinced that rate change is reaching the common people," she said.

In fact, the price reduction for items including shampoos, clinical diapers, table and kitchen utensils, toys like tricycles, solar cookers and umbrellas has been slightly higher than the reduction in the GST tax.

In some cases, such as butter and ghee, cheese, the piece change is marginally lower and the government is engaging with manufacturers to discuss this. 

There is also a lower-than-anticipated reduction in the price of Portland variety of cement.

The government has received 3,169 complaints regarding GST rate cuts of which 3,075 have been forwarded to the CBIC and 94 have been resolved by the consumer affairs department.

Meanwhile, addressing the press conference, Ashwini Vaishnaw, minister for electronics and IT, railways, and information and broadcasting, said that sales of electronic items during this Navratri was 20-25% higher compared to last Navratri. 

The increase in demand of electronic goods has also helped electronic manufacturing which has grown at double-digit CAGR and is currently employing 25 lakh people, he said. 

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

Food inflation has also eased due to the GST reforms, he said.