India's Consumption Story Gets a Major Boost

India’s consumption story could soon receive a major boost, with a mix of tax reforms and economic measures paving the way for stronger domestic demand, according to a new Morgan Stanley report.

Key Drivers Behind the Optimistic Outlook

The report highlights an overhaul in GST rate slabs, personal income tax cuts, monetary policy easing, and signs of pickup in job growth and improving real wages as key factors brightening the outlook for consumption in the country.

Next-Gen GST Reforms on the Horizon

PM Narendra Modi announced that next-gen GST reforms would be rolled out before Diwali, aiming to benefit consumers, small industries, and MSMEs. The finance ministry plans a simplified two-tier GST system based on structural reforms, rate rationalisation, and ease of living.

Potential Impacts and Expectations

The proposed GST regime could have meaningful impacts on growth, fiscal balance, and CPI inflation, with implications for monetary policy. The analysis estimates the total size of stimulus to be about 0.5-0.6% of GDP on an annualised basis, suggesting potential upside of 50-70 bps.