GST Cuts Fuel Consumer Durables Output to 10-Month High

GST Cuts Fuel Consumer Durables Output to 10-Month High

Issue: To analyze the surge in consumer durables production in September 2025, determining the factors driving the growth and assessing the sustainability of this momentum, especially in light of the recent GST rate rationalization.

Facts:

• The GST rate cuts were implemented effective September 22, 2025.
• The Index of Industrial Production (IIP) data, released on October 28, showed that the year-on-year output growth of consumer durables rose to a 10-month high of 10.2% in September 2025.
• Consumer durables include products like passenger cars, two-wheelers, ACs, and TV sets.
• Auto, electronics, refrigerators, and washing machine sales saw a “massive rise” post-GST cuts.

Decision:

The production surge to a 10-month high was directly caused by pent-up demand, seasonal festive stocking, and the implementation of GST rate relief.

Key TakeDowns:

• Drivers of Growth: Economists attribute the sequential rise (9.1% month-on-month) to inventory build-up by manufacturers ahead of the peak festive season and the immediate translation of pent-up demand following the GST rate cuts.
• Massive Sales Spike: The automobile sector saw its best Navratri performance in a decade (34% YoY growth), and overall consumer durable sales jumped 40–45%.
• Temporary Growth Warning: Some economists warn that the high growth seen in September might be temporary, predicting that the impact of the tax cuts on consumption and growth could fade from January 2026 onwards.
• Uneven Sectoral Impact: While auto demand is strong, demand for other sectors like footwear and apparel is not meeting business expectations, leading to a projection that overall consumer durables growth would moderate in Q4 FY26.