GST reform, income tax sops, RBI rate cuts are ‘pro-consumer trifecta’ in economy: Ikigai’s Pankaj Tibrewal

Tibrewal cited an example from 2008 when the government slashed excise duty on automobiles by 4%, which resulted in a surge of 20% in auto sales across categories within a year, despite broader economic headwinds.

Capex-heavy sectors like infrastructure, renewables and industrials have been market favourites for the last five years, but that cycle may be losing steam, and consumption, a theme that has so far under-delivered may be poised to take off, according to money manager Pankaj Tibrewal.

The Founder and CIO at Ikigai Asset Manager, Pankaj Tibrewal believes that GST rationalisation, coupled with income tax relief and interest rate cuts have created a 'pro-consumer trifecta,' putting more money in people’s pockets, which hopefully could reignite demand in the long-neglected consumption plays.

"After five years of outperformance in capex stocks, there could be a reasonable thought process that consumption, which has been a big laggard, can make a comeback," Tibrewal said. Within that, he sees consumer discretionary, autos and durables as the standout beneficiaries. The optimism isn’t just sentiment-driven, and Tibrewal believes this space can deliver immediate results, since the demand here is highly sensitive to price. “Consumer durables have historically shown price elasticity of 1.5 to 2 times. In autos, we’ve seen in the past that even a limited excise cut led to an outsized response in volumes,” he said.

Tibrewal cited an example from 2008 when the government slashed excise duty on automobiles by 4%, which resulted in a surge of 20% in auto sales across categories within a year, despite broader economic headwinds.

Ikigai Asset’s founder added that the latest GST cuts can trigger a similar multiplier, especially as it coincides with lower interest rates and income tax relief. “This is a very significant reform step, in terms of compliance, in terms of making sure volumes improve,” he added.

The timing too is supportive for this pocket, as autos and discretionary consumption have been lagging, overshadowed by the outperformance of capex-driven sectors. With households set to save more from the latest GST relief and consumers’ borrowing costs easing, the balance could tilt in the favour of consumption, Tibrewal said.

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