New Delhi, Sep 25 : The consumer sector in India is showing signs of recovery after more than a year of weakness in urban demand, a new report said on Thursday.

The rebound is expected to be driven by a favourable base, income tax cuts, and a reduction in Goods and Services Tax (GST) rates, according to HSBC Global Investment Research.

Together, these measures are set to put nearly Rs 2'2.5 lakh crore back into the hands of consumers, equal to about 2'8 per cent of overall household spending, the report said.

HSBC noted that the consumption environment has remained muted since the post-COVID boom, but the recent policy changes could provide a much-needed boost.

Urban demand, which has been sluggish, is expected to improve, while rural demand is already strong, supported by rising real wages.

However, the report cautioned that higher savings or debt repayments could limit the pace of recovery.

The report highlighted that GST rate cuts would benefit food and beverage companies more than those in the home and personal care segment.

Products such as biscuits, salty snacks, and chocolates are expected to see a direct rise in consumption because of their popularity in small pack sizes.

In contrast, categories like soaps and oral care may see only a one-time push in demand, the report added.

Meanwhile, earlier this week, traders and business owners also welcomed the next generation GST reforms, saying the changes will increase purchasing power, lower prices of essential items and give a big push to the economy.

They also praised Prime Minister Narendra Modi for introducing the measures during the festive season.

A branded clothing store owner S.K. Sarda on September 22 told IANS that the new GST framework has simplified the system and corrected earlier problems of multiple taxes.

He pointed out that the government has already collected nearly Rs 55 lakh crore through GST, which is being used for national development and defence purposes.

/IANS