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Journalism of Courage
While the Goods and Services Tax (GST) cut announced by the GST Council with effect from September 22 will bring much-needed relief to Indian consumers, a new report has cautioned that a large proportion of shoppers were barely able to find the money to spend beyond food items earlier in the year.
According to PwC India’s Voice of the Consumer 2025 report that focused on the food industry, released on Thursday, 32 per cent of the respondents said they were ‘financially coping’ while another 7 per cent said they were ‘financially insecure’.
Rising liabilities, lower savings
“There is a fair bit of a cost-of-living crunch in the sense that household savings as a percentage are lesser today than they were four years back, whereas the liabilities have actually gone up,” Hitanshu Gandhi, retail & consumer markets lead (director), PwC India, said. Referring to monthly data that the National Payments Corporation of India (NPCI) has recently started releasing on the merchant category-wise break-up of Unified Payments Interface (UPI) transactions, Gandhi said that the high position of debt repayment reflected “fairly heavy stress on households”.
“Therefore, when we asked ‘How comfortable do you feel about paying your bills’, while 60 per cent in India was financially secure, 32 per cent said ‘Look, I am paying the bills, but after that… there is very little left over for any leisure.’”
As per the NPCI data, Rs 3.5 lakh crore or nearly 13 per cent of total UPI payments in the first four months of 2025-26 were for the merchant category ‘debt collection agencies’.
The PwC survey was based on responses from 21,075 people globally, of which 1,031 were Indians. Conducted in the first two months of 2025, the survey respondents were primarily in the 18-44 age bracket, with two-third of them based in large cities.
Impact of rate revision on household budgets, formalisation
As per the report, the GST rate cuts will likely make household budgets “more manageable”. However, it also said that consumers are adopting money-saving behaviours, including shopping at different stores. PwC officials were also not sure how much of a boost consumption would get from the tax cut-induced price reductions.
“Some of the chatter that we are picking up is that price reduction is great. But a lot of that price reduction is going to translate into buying a better electronics product, going on a trip, or eating out — provided you are already consuming a fair bit of branded play,” said Ravi Kapoor, partner and leader-retail and consumer sector, PwC India.
The GST rate cuts are also expected to push up demand for goods made by the formal sector.
“If I take a 5-10-year view, formalisation is going to be very good, because the consumer wants it. The consumer wants trust, quality, and nutrition. If you are able to guarantee all of these things, then why stay informal? Become a formal brand, like what is happening in beauty and personal care, where branded players are mushrooming beyond the big players,” Kapoor said, adding that “quality of consumption” was going to get a leg-up.
“A favourite example of mine is the consumption of basmati rice — from getting consumed on specific occasions such as when I am making biryani to replacing other kinds of rice and consuming it as part of my daily schedule. There are multiple examples of upgrades which are possible across categories,” Kapoor added.
Economists have estimated that the GST rate cuts could boost India’s GDP growth by as much as 60 basis points (bps) and bring down retail inflation by nearly 100 bps over a full year. However, questions remain over how much of the tax cut will be passed on to consumers in the form of reduced prices.
