Festive boost falls flat for consumption goods despite GST cuts

Festive season boost not visible in IIP data

• Festive GST cuts barely affected consumer goods output during Sep-Nov peak months
• Consumer non-durables hit 3-year low; durables output also down from last year
• Economists predict lower rates, tax relief to boost future consumption and production

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Diwali spending and recent GST rate cuts appear to have had a limited impact on lifting output of consumption goods, with production data pointing to muted momentum across both everyday and discretionary segments during the peak festive months of September-November.

Output of consumer non-durables, often seen as a proxy for daily consumption and rural demand, fell to its weakest level in three years during the festive season. Meanwhile, consumer durables production slipped to a two-year low, underscoring the absence of a decisive festive-led rebound in manufacturing.

Non-durables disappoint despite festive window

Consumer non-durables have contracted by an average of 1.1 percent in FY26, their poorest performance in three years. Even during the festive months, output grew by just 0.6 percent.

In earlier years, festive periods typically delivered a stronger lift. FY21 saw festive-season growth of 2.8 percent, FY24 clocked 3 percent, and in FY25, festive demand and post-season restocking pushed non-durables production up to 1.9 percent.

The reversal suggests households may still be prioritising essentials, limiting discretionary and volume-driven consumption even during peak festive months.

Durables soften from last year’s highs

Consumer durables, which track urban discretionary spending on appliances, electronics and other big-ticket items, have also lost momentum. Output growth has averaged 4.7 percent in FY26, a two-year low.

While the festive months did see durables output rise 6.3 percent, this remains well below FY25, when both the annual average (8.1 percent) and festive-season growth (8.7 percent) were materially higher.

Taken together, the data suggests that although festive footfalls returned to shops and showrooms, the production cycle failed to see a breakout boost.

Economists flag weaker IIP momentum

“Despite the demand boost spurred by GST rationalisation, IIP growth averaged 3.6 percent during October–November FY26, lower than the 4.3 percent expansion seen in Q2 FY26,” ICRA Chief Economist Aditi Nayar said.

“Interestingly, average growth in consumer non-durables remained dull at 1.3 percent in October–November 2025, trailing the 4.3 percent rise in consumer durables,” she added.

Hope ahead

Economists, however, remain cautiously optimistic about the outlook. Lower interest rates, GST rationalisation and recent income tax relief could still support consumption in the months ahead.

“For the rest of this fiscal, robust consumption demand on the back of lower interest rates, soft inflation and tax reliefs is expected to continue supporting industrial production,” CRISIL economists said in a note following the IIP data release on December 29.

They added that healthy agricultural output, along with resilient services-sector growth—both domestic and export-driven—should help keep overall economic momentum intact, even as manufacturing-linked consumption remains uneven for now.