Perspective on GST 2.0 by Mr. Manish Sonthalia, Director and Chief Investment Officer, Emkay Investment Managers Ltd
Below the Perspective on GST 2.0 by Mr. Manish Sonthalia, Director and Chief Investment Officer, Emkay Investment Managers Ltd
“GST 2.0 should be viewed as more than just a tax rationalization exercise – it is a structural reform with the potential to decisively shift India’s growth trajectory toward a consumption-led cycle. By simplifying the rate structure and lowering effective prices across key discretionary categories, the reform creates an immediate demand stimulus. Combined with welfare spending and monetary easing already underway, this adds up to a meaningful fiscal impulse of about 0.5% of GDP by FY27, which is substantial in the current macro environment.
The sectoral impact is especially noteworthy. Discretionary consumption is set to see the sharpest pickup, with categories such as consumer durables, autos, leisure goods, and select lifestyle segments poised to benefit from stronger affordability and faster volume growth. Cement should gain from margin improvements in the short run and demand absorption over the medium term, while in FMCG, the benefits are more nuanced – packaged foods are well-placed, but larger incumbents may continue to face pressures on share and pricing power.
While states could face near-term fiscal pressures, we believe compensatory measures are likely, and the broader growth dividend outweighs the risks. Overall, GST 2.0 could mark the beginning of an earnings upgrade cycle, with discretionary consumption leading the way”.
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