India Inc is expected to see 6–7% revenue growth this fiscal, up 25–50 basis points from earlier estimates, according to a report by Crisil. The improvement follows recent reductions in Goods and Services Tax (GST) rates across several sectors.
Crisil stated that the cuts would positively impact consumption, which contributes 15% of corporate revenues. The timing, ahead of the festival and wedding season, is seen as especially favourable amid continued global uncertainties.
Key sectors including fast-moving consumer goods (FMCG), consumer durables and automobiles are expected to see price reductions. The report said the benefits would be passed on directly to consumers in these categories, while sectors such as construction would see a more nuanced impact.
Automobiles are among the biggest gainers, with GST on two-wheelers under 350cc cut to 18% from 28%. This is expected to lift sales volumes by 100–200 bps. Tractors and farm equipment, now taxed at 5%, could see sales rise 150–250 bps, aiding rural mechanisation.
Small cars and compact SUVs—making up over half of the passenger vehicle market—are likely to become 8–9% cheaper, which could lead to a 200 bps rise in sales.
FMCG and packaged foods will also benefit, with GST on items like biscuits, chocolates and personal care products reduced to 5% from 18%. While Rs5 and Rs10 packs may not get cheaper, companies are expected to increase grammage.
Consumer durables such as air-conditioners and large-screen TVs could become 7–8% cheaper. CRISIL predicts this will result in a 100–200 bps increase in demand for these price-sensitive goods.
The report compared the situation to fiscal 2019, when a GST cut on washing machines boosted volumes despite rising raw material costs.
In agriculture, lower GST on biopesticides and micronutrients is expected to drive demand amid a shift towards organic farming. In construction, cement now attracts 18% GST instead of 28%. However, volume growth in the sector is projected to stay modest at 6.5–7.5%.
Hotels with tariffs under Rs7,500 will benefit from a 5% GST, which could increase mid-tier occupancy. The energy sector will also gain, with the removal of coal cess and lower GST rates expected to marginally reduce electricity costs.
Renewables stand to benefit from lower GST rates of 8.9%, which are expected to cut project costs by 4–6%, encouraging new investments.
Crisil noted that the anti-profiteering clause under GST would limit companies from increasing margins, but the overall volume growth across key sectors should drive higher revenues.