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.)