Blank shot? Surveys hardly noticed any impact of GST rate cuts on consumer spending in India

Our calculations suggest that inflation in India’s GST-basket (weight of 17%) decelerated to 2.1% year-on-year in October 2025 and further to 1.8% in November from a stable 3% in the previous 14 months. Core inflation excluding gold was at a record low of 2.5% year-on-year in November, down from 3% in August-September.

The impact of GST rationalization, nonetheless, was expected to go far beyond lower inflation. It was supposed to put more money in the hands of consumers, addressing weak income growth, which was expected to convert into higher consumer spending and thus economic growth. In the absence of high-frequency official data on income and spending, various consumer surveys act as a crucial bridge to gauge current perceptions of these two key variables.

Announced on 3 September 2025, India’s GST rate cuts went into effect on 22 September. According to the Reserve Bank of India’s (RBI) bi-monthly urban consumer confidence survey (UCCS) conducted over the first 10 days of November 2025, the proportion of respondents perceiving a (gross) rise in income and spending declined in comparison with findings of the same survey carried out from 28 August to 6 September.

On a net basis (the share of respondents reporting more minus those expecting less, i.e., with those reporting ‘no change’ left out), while more respondents reported higher income in November (in line with the past trend), the share of respondents perceiving higher spending was the lowest in the past eight UCCS rounds.

RBI’s Rural Consumer Confidence Survey (RCCS) also shows that the percentage of respondents perceiving a (gross) rise in income and spending declined in November vis-à-vis September. On a net basis, while there was a slight drop in income perceptions in November, perceived spending was the lowest in the last 10 surveys.

National Bank of Agriculture and Rural Development (Nabard) has also been publishing a bi-monthly survey since September 2024, its Rural Economic Conditions & Sentiments Survey (RECSS), conducted around the same time as RBI’s.

In sharp contrast with RBI survey findings, 42.2% of rural households—the highest on record—reported an income increase in November 2025, with even more households witnessing higher consumption. On a net basis, respondents were the most optimistic on income growth in that survey, while the net response on consumption was also at its highest level in the last four rounds.

Such divergent survey results indicate that we have no clear evidence yet of higher spending growth after last year’s GST reset.

Some readers may argue that one should look at September surveys instead of November’s. But the results are inconclusive even then. A higher (net) proportion of respondents under the UCCS continued to report higher income in September, but no major rise was seen in spending perceptions.

Likewise, the RCCS showed continued improvement in income but with only a marginal rise in spending. Interestingly, the improvements seen in Nabard’s November rural survey were not visible in September. The net percentage of respondents reporting higher consumption was the lowest in September and that for income was lower than found in the July survey.

Others may argue that we should look at future expectations rather than the current perceptions reported by these surveys. This is difficult to agree with.

Since the GST rate cuts were effective from 22 September 2025, their largest positive impact on perceptions should have been in the immediate months rather than after a quarter or a year.

Even so, net responses on one-year-ahead spending expectations under RBI’s UCCS and RCCS were lower in the September and November rounds than in July.

Further, while Nabard’s survey doesn’t provide consumption expectations, its net response on expected income during the next quarter was lower in September and November surveys than in July, while expected income for the next year increased in November survey (after falling in September).

Overall, whether we look at September or November surveys, rural or urban, RBI’s or Nabard’s, current perceptions or expectations, there is no conclusive evidence of higher spending driven by GST relief. Optimism on income is mixed at best.

One possible reason could be that the assumption of ‘ceteris paribus’ (all other things being the same) failed. It is possible that while GST changes helped boost income and spending in isolation, it was overshadowed by a general deterioration. It is also possible that more money left in people’s hands may not have led to higher spending, resulting in more savings and lower borrowings instead.

Since these surveys track perceptions rather than actual data, some observers may dismiss them. However, ‘rational expectations theory’ underlines the importance of perceptions for an economy to achieve high growth.

We await hard numbers, but a decline in current spending perceptions found by RBI’s RCCS and UCCS and only a small rise in Nabard’s RECSS go against the narrative of high buoyancy in consumer expenditure.

The author is an India Economist, executive director at CLSA India, and author of ‘The Eight Per Cent Solution’.