Samwat 2082: India’s consumption engine may rev up on tax, GST cuts, Pay Commission benefits

The consumption engine of the economy seems all set to roar on the back of reforms. In fact, it may be one of the key triggers for Samwat 2082, as is evident from the initial numbers of auto, and e-commerce sales and a vast multitude of people thronging the key markets in Delhi and elsewhere in the country.

With GST 2.0 coming on the heels of income tax relief on annual income of ₹12 lakh, and the implementation of the Eighth Pay Commission around January 1 next year, the stage is set for the consumption story in the Indian economy to take off. And low inflation and interest rates will only serve as an enabler. No wonder experts are bullish on the consumption story which is waiting to unfold in the domestic economy.

“Samvat 2082 begins on a positive note, thanks to a combination of fiscal and monetary tailwinds. The RBI has cut the repo rate by 100 bps and CRR by 150 bps, together with several measures, injecting much-needed liquidity into the system. This, coupled with the income tax relief of ₹1 lakh crore, would aid demand revival and improved potential for corporate earnings. Inflation remains comfortably low while the GST 2.0 has simplified rates and revived consumer sentiment,” said Motilal Oswal Financial Services in a note.

“We believe this marks the beginning of a turnaround in India's domestic growth momentum, with significant pick-up in consumption paving the way for a robust revival in the private capex cycle. This, along with the improving earnings trajectory, should lend support to Indian equities,” the Motilal Oswal note said.

MP Financial Advisory Services LLP (MPFASL) said India’s consumption engine is poised for a powerful revival in the second half of FY26, supported by “regulatory trident” of tax cuts, rate cuts, and GST rationalisation.

“These policy levers, combined with the twin tailwinds of a better monsoon and easing inflation, are creating a fertile environment for demand recovery. Together, they promise to release additional disposable income, reduce borrowing costs, and lower retail prices, offering a significant boost to household spending,” it said.

“A stronger monsoon this year is expected to boost agricultural output, leading to improved rural incomes and healthier cash flows. This, in turn, should support a pickup in rural consumption and complement the recovery in urban discretionary demand,” said Mahendra Patil, Founder and Managing Partner, MP Financial Advisory Services LLP.  

That said, the advisory firm highlights the risks too, pointing out lags in transmission of monetary easing, with banks passing through only 20–30 basis points of the 100-basis-point repo cut to their MCLR. It also cautions that a sudden food or fuel price shock could undo much of the inflation relief, while fiscal pressures from tax concessions need careful balancing. “Global headwinds, including trade tensions and supply-chain disruptions, also remain a concern,” it said.

“While risks around monetary transmission, and global headwinds remain, the overall backdrop is far more supportive than in recent years,” adds Patil.

And consumers too are upbeat, according to Deloitte India’s Deloitte India’s Consumer Signals: India Chapter, which says that Indian consumers are moving from caution to confidence on the back of easing inflation, digital empowerment, and improved financial stability. According to the report, big-ticket purchases are back in reckoning. The Vehicle Purchase Intent (VPI) Index jumped 6.6 points year-on-year, with only 23% of Indian consumers now finding new vehicles unaffordable, compared to 62% globally, according to the Deloitte report.

It may, however, be noted that even though green shoots are visible, consumption as a percentage of GDP may still take some time to claw back to the 2022-23 levels when demand came back with a bang after the pandemic lull.

In the first quarter of the current financial year, Q1FY26, private final consumption expenditure at ₹27.16 lakh crore remained at 56% of the GDP, which is close to the full year average of FY25 and FY24, when consumption share dipped in comparison to previous years.

The share of private final consumption expenditure touched 58.13% of the GDP in FY22 and was 58% in FY23, after which consumption gradually started slowing down. However, the third significant push to consumption is likely to come in the form of the implementation of the Eighth Pay Commission effective from January 1 next year.