The latest GST reforms are poised to provide a strong boost to the economy by stimulating industrial production, particularly in non-durable goods such as bakery products, juices, personal care items, and household appliances, where output had been under pressure, a latest report by Bank of Baroda said.
At the same time, the rationalised tax structure is expected to support exports in sectors impacted by higher US tariffs, including textiles, chemicals, and dairy, by lowering input costs and enhancing competitiveness, it said.
“Additionally, the reforms are likely to spur credit growth, with bank lending to MSMEs, autos, consumer durables, and retail loans projected to accelerate by an extra 1 per cent in FY26.”
Economists estimate the move could boost consumption by Rs 0.7–1 lakh crore, translating into 0.2–0.3 per cent of GDP. The government pegs the revenue impact at Rs 48,000 crore, a figure considered manageable at just 0.1–0.2 per cent of GDP.
The BoB report highlighted that the lower GST rates are expected to have a strong disinflationary effect.
Food and beverages alone could see prices drop 6–11 per cent in categories like cereals, prepared meals, butter, edible oils, and confectionery. Analysts project headline CPI to decline by 55–75 basis points, revising inflation estimates downward to 3.1 per cent from 3.5 per cent, it highlighted.
After the rollout of GST 2.0, the markets reacted positively, with strong gains in auto, metals, and consumer discretionary stocks. Bond yields softened modestly as fiscal slippage fears eased.
Sector-wise, cement, automobiles, textiles, FMCG, and hospitality are projected to benefit significantly. The festive season is expected to amplify the consumption boost.
The Bank of Baroda Research note maintains India’s FY26 growth projection at 6.5 per cent, citing GST 2.0 as a “big push moment” for domestic demand.