● Efforts to Boost Consumption: The government is proactively addressing the recent economic slowdown by implementing measures aimed at boosting consumption. These include cuts in personal income tax rates, reductions in interest rates, direct benefit transfers (DBTs), and now restructuring of the Goods and Services Tax (GST). The Prime Minister has hinted at reducing GST rates and possibly eliminating the existing 12% and 25% slabs.

● Outlook: The early and intense monsoon has negatively impacted short-term demand. Meanwhile, the ongoing slowdown in central government capital expenditure continues to weigh on corporate earnings and rising disposable incomes. However, recent policy initiatives—such as DBTs, personal income tax cuts, and potential GST rate reductions—should help support a gradual recovery in consumption. These efforts are further supported by RBI’s rate and CRR cuts to enhance system liquidity. We expect 1HFY26 continues to remain weak, however recovery is expected slow and gradual starting 2HFY26.