|

India : Narrow demand response weighs on GST – Societe Generale

Kunal Kundu of Societe Generale argues that India’s Goods and Services Tax (GST) data and Index of Industrial Production (IIP) figures point to a soft consumption backbone. Post-September 2025 GST rate cuts have not produced a broad-based demand uplift, with gains concentrated in motor vehicles and select categories. IIP shows consumer durables outperforming flat non-durables, suggesting everyday consumption remains subdued.

IIP signals uneven household demand trends

"Apart from motor vehicle demand, the economy-wide demand impulse has not yet been strong enough to lift net domestic GST materially once refunds are stripped out. This is consistent with the idea that demand response has been narrow, concentrated in a few rate-cut beneficiaries, rather than broad-based across the consumption basket that typically drives domestic GST buoyancy."

"That’s where usefulness of the IIP data lies, not because IIP is perfect, but because it offers an independent check on whether household demand is strengthening broadly or only in select channels."

"The use-based IIP classification continues to show an uneven consumer picture, with consumer durables (demand that is more skewed toward middle and upper income households) holding up better than consumer non-durables."

"During FY26, while consumer goods production rose 2.45% yoy, it was primarily led by consumer durable goods production, while production of consumer non-durable goods remained flat. indicating unchanged production in the category that typically tracks everyday consumption."

"The point is not that non-durables are collapsing, but that the broad consumption backbone still looks soft. To us, this is hardly the environment in which a demand-led GST upswing usually takes root."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

More from FXStreet Insights Team
Share:

Editor's Picks

GBP/USD loses momentum, flirts with 1.3200

GBP/USD is struggling to maintain its positive bias on Thursday, retreating toward the 1.3200 region in response to the pick in the buying interest around the Greenback. That said, Cable remains under scrutiny as cautious market sentiment keeps investors focused on the US-Iran conflict and political effervescence in the UK.

EUR/USD trims gains, challenges 1.1400

EUR/USD now gives away part of its earlier advance, receding toward the 1.1400 contention zone on Thursday. Meanwhile, the pair’s recovery comes amid extra losses in the US Dollar, at the time when while investors continue to monitor developments in the Middle East and sentiment surrounding global technology stocks.

Gold remains bid and close to $4,100

Gold accelerates its recovery and approaches the key $4,000 mark per troy ounce at the end of the week, adding to Thursday’s advance. However, expectations for a hawkish Fed remain steady and keep the yellow metal’s potential upside contained.

Crypto Today: Bitcoin at $60,000, Ethereum at $1,500, and XRP at $1 face a make-or-break test

Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP) are trading in the red on Friday after three consecutive days of losses, testing their respective make-or-break support levels.

Week ahead – NFP report to challenge Dollar strength and the hawkish Fed

Dollar strength dominates markets, as the hawkish Fed overshadows geopolitics and lower oil prices. NFP week could drive September Fed hike expectations and boost market volatility. The euro lacks fresh bullish catalysts, all eyes on the preliminary inflation report and the ECB Forum.

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.