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The Finance Ministry's Monthly Economic Review for October reports that GST rate rationalisation has boosted consumption by raising disposable incomes and easing inflation, which fell to a record 0.25% in October. Lower GST on 375 items and consolidation of multiple slabs into 5% and 18% have reduced prices for most daily-use goods. High-frequency indicators-such as stronger e-way bill volumes, festive automobile sales, UPI transactions and tractor demand-point to broad-based improvement across urban and rural markets. The ministry expects the full impact of tax cuts to emerge over the next two quarters. Despite global uncertainties, stable inflation, healthy corporate performance and ongoing labour reforms are expected to support India's growth outlook through FY26.
The rationalisation of GST rates has given a measurable boost to consumption, helping strengthen the Indian economy's stability amid ongoing global uncertainties. The Finance Ministry's Monthly Economic Review for October highlighted that easing inflation and recent tax reforms have enhanced household disposable incomes, making the short-term consumption outlook increasingly positive. Advertisement
Retail inflation fell to a record low of 0.25 per cent in October, down from 1.44 per cent in September. This decline was largely driven by the full impact of reduced GST rates, a favourable base effect, and significant drops in food inflation. The ministry noted that high-frequency indicators-such as increased e-way bill generation, strong festive-season automobile sales, robust UPI transaction values, and higher tractor sales reflect broad-based improvements in demand across urban and rural segments.
The report mentioned that the full effect of GST rationalisation on consumer spending would become more apparent over the next two quarters. Effective September 22, GST rates on around 375 items were lowered, and previous rates of 5, 12, 18, and 28 per cent were consolidated into just 5 per cent and 18 per cent, reducing prices for nearly all daily-use goods.
While the external environment still features trade policy uncertainties, global pressures have moderated compared to previous peaks. Independent assessments indicate real GDP growth for Q2 FY26 is likely in the 7-7.5 per cent range, maintaining the strength seen in the economy. Economic growth had already reached a five-quarter high of 7.8 per cent in Q1.
The report further highlighted that global uncertainties including shifting trade policies, geopolitical tensions, and financial market volatility may pose risks to exports, capital flows, and investor sentiment. However, well-anchored inflation expectations, sustained public capital expenditure, and firming demand in both rural and urban areas are expected to keep the economy on a stable footing through the rest of FY26.
Corporate performance remained healthy, with stable profitability and balance sheets, while domestic financial markets benefited from strong institutional participation. The review also stressed the need for structural reforms to sustain and accelerate job creation.
In a major labour reform initiative, the Government of India has implemented four Labour Codes: the Code on Wages (2019), Industrial Relations Code (2020), Code on Social Security (2020), and Occupational Safety, Health and Working Conditions Code (2020). These reforms streamline 29 existing labour laws, modernising regulations, enhancing workers' welfare, and aligning the labour ecosystem with modern work practices. This sets the stage for a future-ready workforce and resilient industries, supporting the vision of Viksit Bharat by 2047.
Source PTI
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