Lower GST, higher spend keep India’s growth engine on track
Strong domestic orders, rising consumption and credit growth offset tariff shocks in export markets: HSBC report
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New Delhi: GST rate cuts have led to retail price reductions and increased household spending, which have offset the tariff-related impact on India’s exports, a report said on Tuesday. “Overall manufacturing output continued to rise, with the fall in new export orders fully offset by a rise in domestic orders. A spurt in input purchases suggests that manufacturing could remain strong in November too,” the report from HSBC Global Investment Research noted. Based on pick-up in agriculture, manufacturing, construction, growth for Q3 CY25 is tracking 7.2-7.4 per cent, the firm said.
The overall exports remained steady in spite of a dip in exports to United States due to tariff-related concerns, the report said.The research house, however, maintained that growth may see some softness in the second half of the current fiscal year due to fiscal consolidation pressures.
GST rates were reduced for around 375 items on September 22, the report said, adding that government tracking indicates that companies lowered prices by more than what was warranted by GST rate cuts for about half of the items monitored.
Pranjul Bhandari, Chief India Economist/Strategist, ASEAN Economist said that increased demand for durable goods, a significant rise in vehicle sales, and heightened e-commerce activity is notable. Further, bank credit growth rose for industries and services, including electronic manufacturing and retail trade, she mentioned. Bhandari said that in spite of exports to the United States declining 12 per cent year-on-year (YoY) in September, following a 25 per cent increase in the first half of the year, the overall exports remained steady.
The slump in exports to US was driven by weakness in jewellery, crustaceans, and textiles, the report noted. Meanwhile, the overall exports remained steady, driven by stronger shipments to non-US markets, strong US-exports in exempted categories like electronics and petroleum, and continued strength in high-tech exports such as services, it said.
