Consumer Sector Seeks GST Reforms, FTAs in Budget 2026

Budget 2026 is expected to focus on rolling out GST reforms, consumption incentives, and implementing Free Trade Agreements to enhance consumer demand in India, as per a Moneycontrol report. In accordance with industry estimates, India is expected to become the second largest consumer market in the world within five years. The recent changes made to GST have increased affordability for consumers in the short term and set the stage for future policy initiatives designed to promote further. 
The rapid urbanisation of India, including the way people are shopping and consuming goods, has created new market opportunities that were previously unavailable. E-commerce and digital payment solutions have fueled the new-age economy. The shift to branded and organised retail will create increased spending opportunities for consumers, according to the Indian Brand Equity Foundation (IBEF). Discretionary items will remain at the forefront of consumer spending as consumer behavior continues to evolve.

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Key Trends Shaping Consumption

In the past year, the Government of India has rationalised GST, which has led to improved affordability and allowed for a steady recovery in consumption among consumers. Rural demand has been relatively robust in the face of inflationary pressure, and urban demand has stabilised after suffering declining growth previously. Additionally, the government's policy initiatives have been the foundation of the continued evolution of the GST to 2.0 level, with an emphasis on simplifying GST rates and focusing on the use of technology to manage compliance.
Overall, the information above is indicative of a continued growth trajectory within the overall consumer ecosystem. Rural consumers are demonstrating resiliency in response to rising cost pressures, and urban consumers are regaining momentum towards a stabilised recovery. Such trends provide optimism for long-term growth potential.

Major Challenges Ahead

Ongoing assistance is required for the sectors of food inflation and monsoons related to the overall rural sides of consumption.
Urban consumption has lagged the last couple of quarters, creating hesitancy for most manufacturers. Consumer goods have been classed under an inverted duty structure, leading to an increase in supply chain costs and compliance burdens.