“We see GST 2.0 as pro-consumption and positive for India’s medium-term growth trajectory. GST rationalisation is a constructive step towards boosting demand without compromising macroeconomic prudence,” says Siddhant Chhabria, research analyst and fund manager, Mirae Asset Investment Managers (India).
As India’s per-capita income grows, new opportunities are emerging in consumption. Naturally, consumption mutual funds are drawing interest.
Consumption mutual funds are equity mutual funds in which fund managers invest in the stocks of companies that benefit from consumer-driven demand, such as those related to FMCG, retail, auto, electronics, and healthcare.
Consumption is a long-term theme driven by favourable demographics, growing per capita income, and urbanisation. Unlike real estate and metals, the consumption sector is less cyclical in nature. Consumption comprises various sub-sectors, namely, FMCG, consumer discretionary, autos, e-commerce, building materials, realty, healthcare, telecom, tourism, and hospitality.
“Consumption, which had been subdued over the last three to four quarters across both urban and rural markets, is now showing signs of recovery. The GST reduction has come as a positive trigger for this theme. We’ve already seen consumption-oriented stocks moving up after the announcement, and mutual funds focused on this space could also benefit in the medium to long term,” says Kranthi Bathini, Equity Strategist at WealthMills Securities Pvt Ltd.
“It’s not just about marquee names like Hindustan Unilever. From FMCG players like Colgate to sectors such as real estate, many parts of the economy fall under the consumption umbrella. That widespread reach makes consumption one of the most interesting long-term themes for investors in India,” adds Baithini.
With the proposed GST cuts expected to boost the consumer appetite, is it the right time for investors to park their money in consumption mutual funds? Chhabria thinks so. “We believe investors should invest in consumption mutual funds with a longer time horizon.”
He points out that the anticipated GST reforms would follow the ₹1 lakh crore income tax incentives announced in Budget 2025. “That was a direct policy push to accelerate India’s consumption-led growth cycle. Additionally, interest rate cuts (100 bps) and 8th pay commission (effective January 2026) could propel consumption recovery in the near term.”
Consumption has grown below the expected post-Covid levels, as revealed by lesser-than-expected growth in personal consumption expenditure (PCE). “PCE has grown at ~10% CAGR during FY20-25 vs ~13% CAGR over FY10-20. The slowdown has been more pronounced for lower-income households, affecting mass consumption. We are now seeing several factors at play which can drive mean reversion in mass consumption,” the fund manager adds.
Baithini says, “With disposable incomes expected to rise steadily over the long run, the consumption story in India remains compelling.”