New Delhi, Oct 9 : India's consumption engine is poised for a powerful revival in the second half of FY26, supported by the 'regulatory trident' of tax cuts, rate cuts, and GST rationalisation, a report said on Thursday.

The report from MP Financial Advisory Services LLP (MPFASL) also forecasted that GDP growth could reach 7 per cent by FY27. This outlook is also supported by a favourable monsoon and easing inflation, which will increase household disposable income and reduce borrowing costs, and lower retail prices.

Transmission of monetary easing remains incomplete, with banks passing through only 20'30 basis points of the 100-basis-point repo cut to their MCLR, it noted.

The report maintained that a sudden food or fuel price shock could undo much of the inflation relief, while fiscal pressures from tax concessions need careful balancing, adding that trade tensions and supply-chain disruptions also remain a concern.

It highlighted that CPI inflation fell from 6.2 per cent in October 2024 to approximately 2.1 per cent by mid-2025, and food inflation became negative in June-July.

System liquidity shifted from a brief deficit in early 2025 to Rs 3.97 lakh crore in August, which helped transmit at least part of the RBI's 100-basis-point repo rate cut into lower lending rates for housing, auto, and consumer durable loans, the report said.

Recent shifts have facilitated a partial transmission of the RBI's 100-basis-point repo cut into lower lending rates, with banks passing through only 20 to 30 basis points to date.

MPFASL forecasted that the private final consumption expenditure, which makes up roughly 61.4 per cent of India's GDP, is expected "to accelerate meaningfully in H2 FY2026."

The RBI currently projects GDP growth at 6.5 per cent for FY26, but with the combined effect of lower inflation, abundant liquidity, and GST reforms, there is upside potential for growth to inch closer to 7 per cent in FY27, the report noted.

/IANS