Modi’s GST Overhaul Aims to Spark Consumer Confidence and Drive Growth
As India gears up for the Diwali festival, Prime Minister Narendra Modi’s latest tax cuts have brought renewed optimism to markets and consumers alike. With sweeping reforms to the Goods and Services Tax (GST) system, the government hopes to ignite consumer spending and offset the slowdown caused by global trade tensions.
Within days of the new GST rates taking effect, shoppers like Udit Thakkar in Mumbai began exploring big-ticket purchases. “This felt like the right time to buy a new car — the tax benefits make a big difference,” said Thakkar, who expects to save nearly ₹150,000 on a vehicle priced around ₹2 million.
Diwali Discounts Meet GST Relief
Traditionally, India’s Diwali season marks the peak of retail sales. But this year, the festive buzz has intensified as tax reductions coincide with promotional offers across sectors.
In a recent national address, Prime Minister Modi described the reform as a “GST Savings Festival,” promising households an estimated $28 billion in total savings.
The government has also encouraged citizens to support “Swadeshi” — locally made products, as global trade tensions and the U.S. tariff war weigh on India’s export industries.
According to Aastha Gudwani, Chief India Economist at Barclays, the new tax regime could lead to a surge in festival demand. “We expect stronger growth this season, especially in automobiles and white goods,” she said.
Car and Appliance Sales Surge
Early sales figures show encouraging signs. Analysts at Nomura reported that Indian retailers saw sales jump between 25% and 100% in the week following the tax changes.
Maruti Suzuki, the country’s largest automaker, sold 75,000 units in that week alone and continues to receive about 18,000 daily bookings. Rival brands Tata Motors, Hyundai, and Hero MotoCorp are also experiencing double-digit growth this Diwali.
At a Maruti Suzuki showroom in Mumbai, decorated with garlands and fairy lights, the festive rush is clear. “Bookings are up by 60–70% from last year,” said one dealership manager. “The new GST rates have definitely lifted buyer sentiment.”
Tourism and Hospitality Also See Gains
The hospitality industry is among the major beneficiaries of the GST cuts. In Goa, banners thanking Modi for “slashing GST rates” can be seen across tourist hubs.
Taxes on budget hotels have been reduced from 12% to 5%, while food products are now exempt from GST. Even air conditioners saw a tax cut from 28% to 18%, a move expected to drive appliance sales.
“This will give a massive boost to the travel and tourism sector,” said Jack Ajit Sukhija, President of the Travel and Tourism Association of Goa.
The Hotel Association of India added that lower taxes will free up disposable income, encouraging more leisure spending and supporting broader economic growth.
Challenges Remain Despite Festive Optimism
However, not all sectors are equally optimistic. Export-oriented industries, especially textiles and gems, continue to suffer from the U.S. tariff war.
RBI Governor Sanjay Malhotra cautioned that tax cuts “cannot completely offset the global trade shocks.”
Some retailers also face challenges in adjusting to the new tax structure. Many still hold old-priced inventory, making it difficult to immediately pass on benefits to customers.
“We weren’t given advance notice,” said Raju Shah, a Mumbai shop owner. “Our shelves are full of stock with outdated price tags.”
Meanwhile, Hindustan Unilever reported only modest growth, citing temporary disruptions in distribution networks as retailers clear older stock.
High Debt and Savings Mindset May Limit Spending
Despite higher disposable income from personal tax cuts earlier this year, analysts say many households are prioritizing savings over new purchases.
“The rise in income hasn’t fully translated into higher consumption,” said Barclays’ Gudwani. “Much of it is being saved instead.”
A Brighter Diwali for Big-Ticket Buyers
Even so, consumer enthusiasm appears strong in key urban centers. Dealers report record-breaking footfall, with many Indians eager to make long-delayed purchases under the new tax regime.
While price-sensitive shoppers still bargain hard, the GST overhaul has successfully rekindled consumer confidence across India’s diverse markets.
As India celebrates Diwali 2025, the combination of tax reforms, festive spirit, and local manufacturing support could mark a turning point for the country’s post-pandemic economic revival.
