India’s complete tax policy reset-- relief in personal tax and simplification of Goods and Services Tax (GST)-- has opened floodgates of new arguments around India’s growth story.

For the common man, this means a cracker of a Diwali with more money in pockets. For Modi & Co, it underlines the push on ‘ease of living’ for citizens and small businesses even if that means a near Rs 1.5 lakh crore revenue implication. The question, however, is whether India Inc will pass on this benefit to consumers, and if yes, by when.

The latest GST card has reignited consumption debate, but some argue that India’s growth will stay anchored in investment, not demand.

Tax cuts and rate easing have raised hopes of a consumption lift. Stocks of discretionary plays like autos and white goods rallied 20–30% after the GST rate cut announcement. The FMCG sector is also expected to gain. “The GST rationalization measures announced by the government are expected to have a positive impact on the FMCG sector's sales volumes, particularly in the packaged food and personal care segments. With the majority of product segments transitioning to a 5% GST rate (excluding the 40% rate applicable to aerated and caffeinated beverages), resulting in an overall tax benefit of 7-13%, we anticipate a complete passthrough of the rate cuts to end consumers through reduction in prices of goods and increase in grammage,” said Anuj Sethi, Senior Director, Crisil Ratings, adding that the subdued inflation and lower interest rates further support sales growth.

Yet, Axis Bank’s Chief Economist Neelkanth Mishra cautioned it would be wrong to assume a pivot in growth strategy.

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Speaking on CNBC-TV18, Mishra said the fundamental drivers of the economy have not shifted. He also pointed out that the objective and catalyst of the GST move was the expiry of the compensation cess this year.

“You don’t believe you’re going from capex to consumption, 0% probability of that, right? Because I think the priority remains to build infrastructure. It will all be from the government side. It will be primarily supply side interventions. It’s not going to be consumption boost,” he said.

The argument comes at a time when GDP growth hit a five-quarter high of 7.8% in Q1FY26, while the government takes measures to list consumption and urge higher private investment. As per FinMin, the share of private consumption in nominal GDP increased from 60.2 per cent in FY24 to 61.4 per cent in FY25. This marks the second-highest level in the last 20 years, indicating sustained strength in consumption demand across the country.

While tax and GST cuts have dominated headlines, Mishra argued that the deeper story of India’s economic slowdown in FY25 lies elsewhere. He said the weakness was less about fiscal consolidation and more about an unintended squeeze in liquidity. “If your credit growth goes from 16.3% in March 2024 to 9.8% in May 2025, that’s a six-and-a-half percentage point slowdown. Given that banking system credit is about 56% of GDP, that alone is more than a 3% drag,” he explained.

He added that monetary easing takes time to transmit. “It’s like pushing on a string. I was expecting that by November–December, some credit growth pickup will start happening, and that is absolutely critical for the economy to revive,” Mishra said.

The Reserve Bank of India, since February, delivered a gradual 100-basis-point cut in policy rates, the sharpest in recent years, lowering borrowing costs for home loans, vehicles, and credit.

Looking ahead, Mishra said the big change over the next 12 months would be a revival in credit growth, alongside a pick-up in discretionary demand and construction activity. But he warned against betting on global exposures like US tariffs given growing signs of stress.