Indians have paused big purchases in the hope that prices will drop after the goods and services tax slabs are merged. Still, consumer goods makers, electronics manufacturers and retailers press ahead with their preparations for a festive surge in demand.
Brands have ramped up promotional activity, are expanding reach, lining up deeper discounts and focusing on premium products in anticipation that discretionary consumption will surge during the period considered auspicious for buying smartphones and kitchen appliances to chocolates. Companies are betting that an early decision on merging GST slabs will further propel demand.
“The industry is hopeful that the new tax rates will be announced by September, which could trigger a rebound in demand,” an industry expert said. “Despite the sluggish summer season that weakened sales of cooling products, he remains optimistic about closing the financial year with a 15-20% growth.
Prime Minister Narendra Modi on Independence Day announced GST reforms to provide relief to households. The government has proposed to retain two major GST rates, eliminating the 12% and 28% slabs. Most of the products and services currently in this category will be moved to 5% and 18%, reducing prices for consumers.
The GST Council, in its meeting scheduled for 3-4 September, is expected to decide on the proposed two-rate system.
At present, consumer sales have largely stalled as buyers hold off in anticipation of upcoming GST revisions, he said, adding that only business-to-business transactions and purchases linked to home renovations are continuing. He said the market could see greater discounting and competitive intensity as more companies rush to liquidate stock.
Brands prep for the surge
Despite this GST-induced lull, large electronics and fast-moving consumer goods (FMCG) companies are pressing ahead with festival season preparations. Distribution networks are being expanded, and promotional activity has surged since mid-August.
“Off-takes and footfalls in modern trade remain very strong—we saw that starting 15 August weekend,” another industry expert said, which runs in-store promotions. More companies are reporting a sharp uptick in hiring for in-store promotions, with staffing levels reaching up to 1.5 times the usual volume, he said. “The on-ground investment in in-store promotions between August and December clearly seems to be very strong.”
Promising early signals
There are already signs of demand picking up.
“We do see this festive season to be positive, with initial traction in modern trade and e-commerce quite strong,” another industry expert said “Quick commerce sales have also been strong so far. Urban demand is also (strong).”
He said consumers are unlikely to see many price hikes from FMCG companies this festival season. “Food inflation is down and income tax reliefs, along with a good monsoon, should bode well for consumption overall.”
A recent survey from the Retailers Association of India (RAI) revealed that retailers across food, jewellery, apparel, and footwear saw an 8% increase in retail sales in July over a year earlier.
“For the past three months, growth has held steady at 7-8%, which is higher than what we were seeing at the start of the year,” another industry expert said. “This suggests that consumers are spending a little more on discretionary products, and retailers will be watching closely to see if this continues through the festive season.”
While Global uncertainties remain a factor, and GST reforms are still under discussion, he said the industry is “moving ahead with cautious optimism”.
Waiting for GST boost
Godrej Group expects a good monsoon and the rural economy to drive festive demand for appliances in mass segments.
“If demand doesn’t meet expectations, the industry might see some discounting, “ another industry expert said. “We have set an ambitious target of 40% growth in the festive season backed by an extensive product lineup with advanced AI-powered technologies, aesthetic designs and enticing consumer offers.”
He expects GST reduction to boost demand for its premium products like air conditioners as benefits will be passed on to consumers.
Distributors of FMCG products, too, hope that the rationalized GST rates are rolled out without any delay, allowing retailers to clear out their existing stock and transition to lower prices.
“Festive demand has been steady so far,” another industry expert said. “It will be a normal period for the industry. We have to wait and watch the impact of GST; we are still uncertain, and we don’t know what prices will go down. Companies are going ahead with their festive season offerings.”
