Bank of Baroda Forecasts Rs 1 Lakh Crore Consumption Boost from GST Cuts In FY26

The Bank of Baroda (BoB) has projected that recent GST rate cuts will boost consumption by nearly Rs 1 lakh crore in FY26. The report, released on September 10, 2025, highlights how the rationalisation effective from September 22 will drive this surge, adding 0. 2-0. 3% to the country's GDP.

Reports also indicate that consumer savings from lower taxes on essentials could translate into higher demand across sectors. The BoB analysis also anticipates a decline in inflation by 40 basis points, with SBI Research projecting 65-75 bps relief in food and core categories.

This comes amid broader GST reforms announced by the Finance Minister, aimed at simplifying slabs and reducing rates on daily use items. It is worth noting that the changes are expected to offset any initial revenue losses through increased economic activity.

Sectors like FMCG and automobiles stand to gain, with companies such as Mahindra already slashing prices by up to Rs 1.56 lakh for some models.

The reforms, effective from September 22, 2025, include rates rationalized mainly to 5% and 18%, with existing slabs including 0%, 5%, 12%, 18%, 28% on various goods, making essentials cheaper.

However, some reports warn of a Rs 3,700 crore central revenue loss for FY26, though Finance Minister Nirmala Sitharaman remains confident it won't impact fiscal targets. Consumption in August showed a 6. 5% YoY increase in GST collections at Rs 1.86 lakh crore, per official data.