Bank of Baroda Sees ₹1 Lakh Crore Consumption Boost in FY26 from GST Rate Cuts

The Bank of Baroda (BoB) has projected that the recent GST rate cuts could lift consumption by almost ₹1 lakh crore in FY26. In a report released on September 10, 2025, the bank noted that the rationalisation, set to take effect from September 22, is expected to add 0.2–0.3% to India’s GDP.

Reports suggest that consumer savings from reduced taxes on essentials are likely to spur demand across sectors. The BoB analysis further projects a 40-basis-point drop in inflation, while SBI Research estimates a sharper relief of 65–75 basis points in food and core categories.

The development comes as part of wider GST reforms announced by the Finance Minister, focusing on simplifying tax slabs and reducing rates on everyday essentials. The government expects the resulting boost in economic activity to balance out any initial revenue losses.

Sectors like FMCG and automobiles are expected to benefit, with companies such as Mahindra already cutting prices by up to ₹1.56 lakh on select models.

Taking effect from September 22, 2025, the reforms streamline GST rates largely to 5% and 18%, replacing the earlier 0%, 5%, 12%, 18%, and 28% structure, thereby making essentials more affordable.

Some reports caution that the move could result in a ₹3,700 crore revenue loss for the Centre in FY26. However, Finance Minister Nirmala Sitharaman has expressed confidence that fiscal targets will remain unaffected. Official data shows consumption in August drove a 6.5% year-on-year rise in GST collections, touching ₹1.86 lakh crore.

Also Read: India’s Vehicle Sales Grow 2.84% in August Amid GST 2.0 Wait