By Kavita Mistry 
India’s broad consumption tax reduction led to a surge in consumer spending on products ranging from cars to kitchenware during the month-long festival season.
The tax cut helped stimulate an economy that had been weakened by a 50% import levy imposed by the United States.
India’s Tax Cut Sparks Festival Spending Boom, Reviving Economy Hit by US Import Levy
Spending between September 22 and October 21 — the period covering Navratri to Diwali — rose 8.5% compared to the same period last year, according to data from Bizom shared with Bloomberg News.
Total sales across India surpassed 6 trillion rupees ($67.6 billion), with jewelry, electronics, apparel, furnishings, and sweets being the top-selling items, according to B. C. Bhartia of the Confederation of All India Traders.
The rise in sales indicates a recovery in domestic consumption that had stalled earlier due to steep US tariffs.
The Modi government reacted to the slowdown by cutting the Goods and Services Tax (GST) from September 22 for nearly 400 product categories.
India’s major automakers — Maruti Suzuki, Tata Motors, and Mahindra & Mahindra — reported sharp sales increases as cars became more affordable under the new tax regime.
Hyundai and Tata Motors See Festive Sales Surge with Strong Dhanteras Demand
Hyundai Motor India recorded a 20% rise in sales during Dhanteras compared to the previous year.
Tata Motors sold over 100,000 cars between Navratri and Dhanteras.
Mahindra experienced a 27% growth in tractor sales, driven by strong rural income following a good monsoon season and the tax cut.
To manage high demand, Maruti Suzuki’s production teams have been working on Sundays, especially to meet bookings for smaller cars, said Partho Banerjee, senior executive officer for marketing and sales.
Demand for Maruti’s entry-level models such as the Alto, S-Presso, WagonR, and Celerio is so strong that dealers humorously note that “helmets left behind in showrooms” belong to customers upgrading from two-wheelers to cars.
Financial services firms like Kotak Mahindra Bank and SBI Cards & Payments Services also saw strong growth in consumer spending across multiple categories.
“We saw buoyancy in the kitchen category,” said Kaleeswaran A., CFO at Crompton Greaves Consumer Electricals, noting that pressure cookers and similar products benefited from the tax reduction.
However, the sudden tax cut caused temporary disruptions in supply chains as businesses and distributors rushed to sell goods at older prices.
Some consumers delayed major purchases from mid-August to late September to take advantage of the reduced tax rates.
Nomura economists Sonal Varma and Aurodeep Nandi cautioned that the sales surge could partly reflect “pent-up demand,” and that trends in December to January should be considered for a clearer picture.
A report from BofA Securities noted that despite improving conditions, weak income growth, sluggish labor markets, and a fading wealth effect still constrain consumer sentiment.
Companies remain optimistic despite these challenges.
Crompton’s Kaleeswaran expects the strong sales momentum to continue through January and possibly beyond.
The company is also monitoring growth in real estate and the wire and cable sectors as indicators of rising household confidence.