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Informist, Tuesday, Sept. 30, 2025

 

MUMBAI – The rationalisation in the Goods and Services Tax rates is expected to lower the CPI inflation by 25-50 basis points starting October to September 2026, said ICRA Ltd. in a report Tuesday. On the other hand, a drive in private consumption is expected to boost the GDP growth for the current financial year ending March by 50 bps to 6.5%. 

 

Private consumption contributed nearly 57% to the GDP growth. "Private consumption growth to remain healthy, driven by firm rural demand and an expected pick-up in urban demand, owing to rationalisation of GST slabs, income tax relief, transmission of rate cuts leading to lower equated monthly instalments, and the moderation in food inflation," the report said. The weighted average GST rate is expected to dip to a single digit from 11.6% in FY24, it said. 

 

However, even as domestic consumption is expected to improve in FY26 due to the GST rate rejig, private capital expenditure may be limited due to tepid external demand and imposition of steep US tariffs on Indian goods, ICRA said.

 

"As regards the capital cycle, while government capex will remain steady, previous capital capex may not increase materially while the sectors where consumption will pick up should give some boost on the capital utilisation," K. Ravichandran, executive vice-president and chief rating officer at ICRA said in a call with the media. "...We believe because of the export-related events and also import concerns, the overall capital cycle remains subdued in the near term."

 

US had imposed a cumulative 50% tariffs on Indian goods, including a 25% penalty for India's purchases of Russian oil. The steep tariffs is expected to reduce India's merchandise exports to the US during Oct-Mar, which, in turn, would weigh on GDP growth during this period. Further, potential job losses in export-oriented and labour-intensive sectors such as textiles, footwear and leather industry could limit growth in consumption. 

 

On the corporate earnings front, ICRA said the growth in assets under management of non-banking financial companies is expected to remain moderate as lenders have tightened their underwriting in the backdrop of asset quality concerns. This is even as liquidity has improved and the interest rate in currently in a easing cycle. Microfinance institutions and non-banking financial companies with presence in unsecured personal loan segments or loans to small- and medium-sized enterprises have been put under a watch by ICRA with a high share of entities under negative outlook. However, ICRA said that the share of unsecured loans in the total book of non-banking financial companies have begun to flatten from higher levels. Non-banking financial companies are expected to expand by 15-17% in the current year, said Prartik Singhania, vice-president at ICRA.  End

 

Reported by Srijita Bose

Edited by Deepshikha Bhardwaj

 

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