A few days after GST 2.0 was unleashed on September 22 this year, I wrote a cautionary column asking experts not to go overboard with frenzied speculation about how a sustained consumer boom was inevitable because of the revolutionary reforms. As GST rates were lowered and slabs reduced, one of the headlines that excited everyone was that the deliveries of cars by Maruti Suzuki crossed 25,000 units in a day.
This was fabulous news. But a few critics maintained that this was more of an indication of pent-up demand, as buyers had stopped buying cars in August and September due to the GST cuts. Such a consumption frenzy was unsustainable and would not continue over the next few weeks, forget months. However, as media headlines go, most obsessively focused on the record sales of passenger cars.
What some forgot, or chose to ignore, was a sober fact. Since the drastic slump in car sales during the Covid pandemic, the annual volumes since 2021-22 broke previous records. In 2024-25, the figure crossed a major milestone of four million units. Thus, it was not so unexpected for buyers to throng the car showrooms during this Navratri when GST 2.0 cuts were implemented. But as I maintained in my columns, two-wheelers are the bedrock of the consumption story in India.
Cars are important, yes, but sales of motorcycles and scooters are more crucial as an indicator of the health of consumer sentiments. This is because the majority of Indians cannot afford cars. For them, mobility implies motorcycles and scooters which, from a record sale of 21 million units in 2017-18, had not done well until recently. The decline started before the pandemic, and year after year, it sank further, stagnated, or grew marginally.
In 2024-25, the sales of two-wheelers were less than the 21 million clocked years ago in the pre-Covid period. But on this front the policy-makers, economists, and consumers need to cheer for GST 2.0. If two-wheelers are accepted as a real barometer to gauge buying sentiments, the consumption story has possibly turned the corner, and is over the trough. Early figures in media reports indicate that GST cuts, without doubt, proved to be a major trigger.
Although the final figures will be out soon, early ones of dispatches by companies hint that they will sell three million two-wheelers in October 2025. Add to this the half-yearly (April-September) volumes of just over 10 million units, and one has a cumulative figure of 13 million for the first seven months. Remember, the festive season is still not over. There will be a spate of marriages until January, and a fresh buying fervour during Christmas and New Year’s.
One expects that in 2025-26, two-wheelers, for the first time since 2017-18, will break the earlier volume record. If true, this will be a conclusive indicator that the buying sentiments have turned positive, and consumption revival is on its way. For the past few years, the aspirational Indians, lower middle-class, and below, have refused to open their wallets for discretionary purchases, which is possibly a two-wheeler, smart phone, a nice domestic vacation, or an expensive home and kitchen appliance. This has changed since GST 2.0.
Remember that in 2024-25 the country’s GDP was Rs 335 lakh crore, of which Rs 200 lakh crore was spent on consumption and buying goods and services. Ever since economic reforms kicked in, and especially in this century, India has proved to be a consumption-driven economy, with private consumption of 60 per cent of the overall GDP. Most analysts seem to converge on the fact that in 2025-26, consumer spending is likely to grow by at least 10 per cent, which will add Rs 20 lakh crore to the GDP.
Many have wondered why institutions such as the International Monetary Fund, World Bank, Reserve Bank of India, and the ratings agencies like Moody's and Fitch have upgraded India’s GDP near-term forecasts, despite the punitive tariffs imposed by the US, and geopolitical and global uncertainties. We now know the reason. Aspirational Indian middle-class consumers have finally woken up from their deep slumbers. Post-GST 2.0, they have resumed their consumption, which is reflected in the record sales.
Of course, these tendencies will benefit growth and GDP. We tend to exaggerate the bad news, and understate the good one, especially when we are surrounded by disruptions. We live in such an age. This is why most were swayed by the GST collection figures that were disclosed a few days ago. The media headlines stated that the October 2025 collections grew by 4.6 per cent Year-on-Year to Rs 1.96 lakh crore. For some, it indicated that GST 2.0 has not worked. Others explained that the figure went up despite GST rate cuts.
A media report stated, “This was the slowest pace of increase this fiscal. In August and September, GST collection rose 6.5 per cent to Rs 1.86 lakh crore, and at 9.1 per cent to Rs 1.89 lakh crore, respectively. Gross domestic revenue grew 2 per cent to Rs 1.45 lakh crore, while tax from imports rose nearly 13 per cent to Rs 50,884 crore in October. The data showed GST refunds rose 39.6 per cent year-on-year in October to Rs 26,934 crore.”
Hidden in this maze of figures are two crucial caveats. The first is that any monthly collection figures for GST pertain to the sales in the previous month. Hence, the October 2025 figures reflect the Government’s earnings from September sales. Now, in September, for the first three weeks, thanks to Prime Minister Narendra Modi’s grand announcement on August 15 that GST cuts and a double Diwali bonanza were on their way, sales dipped. Apart from essential items, buyers waited for the lower prices.
Only during Navratri, beginning September 22, did the consumer frenzy begin. Thus, the September sales include the buying that was concentrated in the last nine days. Despite this scenario, the October collections for sales in September have gone up; even if by 4.6 per cent, it is a major achievement. It implies that the last nine days of September more than made up for the wait in the first three weeks. Thus, GST 2.0 is a phenomenal success, which will show up in the November GST collections for sales in October.
Second, check out the last sentence in the report on the GST collections. Refunds rose by nearly 40 per cent. This dipped the figures. For weeks, the government was criticised for going slow on refunds. This is what showed in the collection figures for August and September, when refunds were delayed. Hence, GST passed the collection test, as well as what I had called the two-wheeler one.
The author has worked for leading media houses, authored two books, and is now Executive Director, C Voter Foundation