Core Viewpoint - The implementation of the next-generation Goods and Services Tax (GST 2.0) is prompting consumer goods manufacturers to reduce prices and enhance communication strategies to facilitate a smooth transition, with expectations of increased consumption as benefits from tax rationalization are passed on to consumers [1]. Group 1: Company Actions - Companies like ITC, Parle, and Bisleri are preparing for the GST transition by implementing price cuts and aligning their internal systems with the new tax codes [3][4]. - ITC has announced price reductions across its food categories effective from September 22, aiming to inform trade partners and consumers about the changes [3]. - Bisleri International has revised its prices in accordance with the GST reduction, with newly priced stocks set to enter the market [4]. Group 2: Market Dynamics - During the transition, both old and new price tags will be visible in the market, and companies are managing dual stock situations to comply with the new GST invoicing and consumer protection norms [2][4]. - The All India Consumer Products Distributors Federation (AICPDF) reported that most existing stocks have been aligned with the revised tax structure through special trade discounts and QPS schemes [4]. Group 3: Consumer Expectations - Industry observers anticipate that the GST reforms will not only boost consumption in mass-market goods but also in premium segments, particularly in categories like LED TVs above 55 inches [5].

Core Insights - India's retail inflation increased to 2.1% year-on-year in August 2025, up from 1.6% in July, remaining within the Reserve Bank of India's (RBI) comfort zone of 2-6% [5][12] - The RBI maintained its benchmark repo rate at 6.5% for the eleventh consecutive time, with expectations of a potential cut later in the fiscal year [2][11] - The inflation outlook for FY 2025-26 has been revised downwards from 4% to 3.7% following the recent RBI Monetary Policy Committee meeting [5][12] Inflation Trends - The increase in inflation is attributed to fading base effects, solid demand, and a weakening rupee, with expectations for inflation to accelerate but remain controlled [6][12] - Food prices, which had been moderate, began to firm up, but overall food inflation is expected to stay moderate due to healthy agricultural activity and favorable conditions [9][10] Economic Projections - S&P Global projects CPI inflation to average 3.3% in FY26, down from an earlier forecast of 3.5%, while CareEdge has lowered its projection for FY26 to 2.7% from 3.1% [7][10] - The PHD Chamber of Commerce and Industry anticipates a further decline in CPI inflation aided by GST reforms, which are expected to reduce production costs and stimulate consumption [8][12] GST Impact - GST rationalization is seen as a cushion that could lower CPI inflation by 70-90 basis points annually, assuming effective pass-through to consumers [10] - The proposed GST 2.0 reforms package is expected to simplify the tax structure, further aiding in price stability and consumption growth [8][12]