Datanomics: Fast-moving goods and services key to meeting Modi's objectives

Looking from a different perspective of durability of the products, it is non-durable or fast moving products which would have higher impact on the demand

The GST Council on September 3 dropped two tax slabs, leaving the indirect tax regime with three slabs — 5,18 and sin rate of 40 per cent. A host of fast-moving items such as processed food and services will now come under a lower tax rate,leading to a drop in prices and likely increase in demand. Spend on foodand non-alcoholic beverages has constituted 28-32 per cent of private final consumption expenditure (PFCE) for seven years since 2017-18 (FY18), the year GST came into existence (from July).

 

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Besides food, GST rate cuts on small cars, motorcycles may have the desired impact. It should be noted here that transport given in the chart is quite a wide segment, also including services of taxi, auto rickshaws, planes, trains, etc. Here a cut in GST on auto rickshaws may lift demand too. Reduction in the GST rate on hair oil, toilet soap bars, shampoos mayalso add to demand since these come in miscellaneous goods and services. Less GST ontextiles, medical drugs, insurance, hotels and restaurants as well as stationery would also have some impact on the demand in the economy. Refrigerators and TVs come in a widergroup of furnishings and household equipment etc which is only 2-3 per cent of consumption demand (non-government) in the economy. 

 

 

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Non-durable or fast moving products would have a higher impact on the demand. In fact, services too are generally consumed instantly. Together, they constitute around 90 per cent of the private demand for consumption in the economy.

 

PFCE -- denoting non-government expenditure on consumption -- grew by 5.6 per cent in 2023-24. It rose to 7.2 per cent in 2024-25. And it was 7 per cent during the first quarter of the current financial year against six per cent in the previous quarter.