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Summer Sales Slump: Why GST Cuts Failed to Boost Consumer Demand

India's consumer electrical and durables sector experienced weaker-than-expected demand last quarter despite GST reductions. Summer products like air conditioners were hit hardest with nearly 20% decline due to high inventory and purchase deferment. Electrical companies performed better than durable goods manufacturers, showing mixed results across categories. The sector faces ongoing challenges from commodity price increases and upcoming regulatory changes in early 2026.

Key Points: GST Cut Fails to Boost Summer Product Sales Centrum Report

  • Summer product categories saw 20% YoY de-growth despite GST benefits
  • Electrical firms outperformed with 9% sales growth while durables remained flat
  • Rising copper and aluminum prices may force companies to hike prices
  • Companies intensifying cost rationalization and premiumization to protect margins
3 min read

Despite GST cut, summer consumer product sales decline: Centrum Report

Despite GST reduction, India's consumer durables sector faces weak summer product demand amid inventory issues and extended monsoon, Centrum analysis reveals.

"Weak primary and secondary sales of summer product categories due to high opening inventory and five week GST transition period - Centrum Report"

New Delhi, November 18

India's consumer electrical and durables sector witnessed weaker-than-expected demand in the second quarter of FY26 despite the benefits of GST reduction, according to a report by Centrum.

The brokerage highlighted that Q2FY26 was marked by soft sales in key summer product categories as companies faced inventory challenges, a prolonged GST transition period, and the impact of an extended monsoon.

It stated "Weak primary and secondary sales of summer product categories due to high opening inventory and five week GST transition period, which led to purchase deferment....... GST transition & extended monsoon affect summer product demand".

Centrum noted four major themes during the quarter, weak primary and secondary sales in summer-linked categories, contraction in EBITDA margins due to low fixed-cost absorption, intensified cost rationalisation efforts by companies, and a continued focus on premiumisation to improve realisation and margins.

According to the report, the coverage universe of Centrum posted a 5 per cent year-on-year revenue growth at Rs 303bn during the quarter. Electricals firms outperformed with sales rising 9 per cent YoY to Rs 163.1bn, while durable companies reported flat revenue at Rs 139.6bn.

The report said the underperformance of the overall sector was largely linked to the higher skew towards summer products, which were hit by high opening inventory and a five-week GST transition period that prompted purchase deferment by traders and consumers.

The report added that rising prices of key commodities such as copper and aluminium are emerging as important factors to watch, as companies may need to take price hikes to protect margins.

Another key monitorable is the upcoming BEE norm transition effective from 1 January 2026, which could influence primary sales in Q3FY26 as companies prepare for the regulatory change.

Across product categories, performance remained mixed. Wires and cables (W&C) registered mid-teen volume growth, driven by strong B2B demand and up-stocking by trade amid rising copper prices.

Large W&C manufacturers delivered around 20 per cent value growth. In contrast, the room air conditioner (RAC) segment saw nearly 20 per cent YoY de-growth in H1FY26.

Channel inventory levels also varied across segments. TPW fan inventory remained very high, while inventory for ceiling fans was slightly above normal.

After several quarters of price pressure, LED price erosion has now stabilised, helping value growth outpace volume growth, particularly in the B2B space.

Meanwhile, washing machines recorded healthy growth due to monsoon-driven seasonality, and kitchen appliances benefited from festive-season demand.

The report expects the sector to continue facing near-term challenges but said the focus on premiumisation and cost efficiency could support margin recovery ahead.

- ANI

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Reader Comments

R
Rohit P
As someone in retail business, I can confirm the GST transition period caused confusion. Many customers postponed purchases expecting better deals post-transition. The inventory management issues mentioned here are very real.
A
Arjun K
Interesting that wires and cables grew while ACs declined. Shows infrastructure projects are driving growth while consumer spending remains weak. The copper price rise is worrying though - might affect construction costs.
S
Sarah B
While the report is comprehensive, I wish they had more data on how this is affecting employment in the sector. When companies focus on cost rationalization, jobs are often the first casualty. Hope the government is monitoring this aspect.
V
Vikram M
The premiumisation trend makes sense. I recently bought a premium AC despite the cost because energy efficiency matters in the long run. BEE norms transition in 2026 will push more people toward efficient products. Good for environment! 🌱
M
Michael C
The mixed performance across categories shows how complex our market is. While summer products struggled, washing machines and kitchen appliances did well. Companies need better diversification to handle seasonal fluctuations.

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