PM Modi’s GST Reform Sparks Festive Optimism
India is counting on Prime Minister Narendra Modi’s Diwali tax cuts to ignite consumer spending during the country’s biggest shopping season. The government’s Goods and Services Tax (GST) overhaul, introduced in late September, is designed to simplify tax rates and give households more purchasing power.
For shoppers like Udit Thakkar, the timing couldn’t be better. The 27-year-old Mumbai resident said he expects to save ₹150,000 ($1,688) on his new car purchase, thanks to the tax reduction. “It’s the right time to buy. The new GST cuts help us save a good amount,” he said.
Modi’s $28 Billion “GST Savings Festival”
Last month, Modi announced what he called the “GST Savings Festival,” promising citizens a $28 billion relief package from tax revisions. He also urged people to buy Swadeshi (locally made) products to support domestic businesses amid global trade tensions and U.S. tariffs that have hurt Indian exports.
According to Barclays India economist Aastha Gudwani, the GST cuts could give a strong push to festive demand. “We expect the festive season this year to outperform early estimates,” she said.
Auto and Appliance Sales Drive the Boom
The auto industry has emerged as a key winner of the policy change. Analysts at Nomura reported that retailers saw sales growth between 25% and 100% in the week after the GST cuts took effect.
Maruti Suzuki, India’s largest carmaker, sold 75,000 units in just one week, with daily bookings reaching 18,000, nearly double from last year. Other brands like Tata Motors, Hyundai, and Hero MotoCorp also forecast strong double-digit growth this Diwali season.
The hospitality and home appliance sectors are also expected to gain, with new GST rates lowering taxes on air conditioners (from 28% to 18%) and budget hotel stays (from 12% to 5%).
Tourism and Hospitality Sector Welcomes Reform
In Goa, a popular tourist destination, banners featuring Modi thanked the government for the GST relief. Jack Ajit Sukhija, head of the Travel and Tourism Association of Goa, said the move is a major boost.
“The reduction in taxes on hotels and food products will drive travel and leisure spending,” he said.
The Hotel Association of India agreed, stating that the reform could encourage discretionary spending and strengthen economic growth during the festive season.
Challenges: Trade Tensions and High Household Debt
Despite the optimism, experts warn that global trade conflicts and rising household debt could limit the impact. Reserve Bank of India Governor Sanjay Malhotra cautioned that the tax cuts “cannot fully offset the effects of international trade pressures.”
Some companies, like Hindustan Unilever, noted temporary disruptions as distributors adjusted to new pricing systems. Smaller retailers also struggled to pass on the benefits to consumers, with many still holding old-priced inventory.
Retailer Raju Shah from Mumbai said, “The decision came suddenly, so we’re still selling old stock. It will take time to balance out.”
Mixed Consumer Response Despite Discounts
Even with strong sales numbers, Indian shoppers remain price-sensitive. A Maruti Suzuki dealership manager in Mumbai said bookings are up 60–70% from last year but added that customers continue to bargain aggressively.
“If I offer a car at ₹500,000, the customer will still check if another dealer sells it for ₹490,000,” he said.
Outlook: Diwali Season Brings Hope for Growth
While challenges persist, India’s GST reforms are clearly energizing sectors like automobiles, tourism, and retail. Economists believe that continued tax relief and stable interest rates could sustain momentum into early 2026.
This Diwali, India is betting on tax cuts to brighten its economy — and so far, the lights seem to be turning on.
