Lollapalooza effect

IN NEWS: ₹3 Lakh Crore “Lollapalooza Effect” – Boost to Consumption & Markets

Context:

• India to witness a ₹3 lakh crore consumption boost, driven by:
  • GST rate cuts (effective from Navratri).
  • Income tax relief.
  • RBI repo rate reductions.
• Analysts term this convergence a “Lollapalooza Effect” – a rare policy trifecta creating a multiplier impact on demand.

Key Estimates:

• GST cuts: ₹1.5–2 lakh crore savings (HSBC).
• Income tax relief: ~₹1 lakh crore.
• Repo rate cuts: ~₹15,000 crore.
• Total Impact: ~₹3 lakh crore stimulus.

Consumption Trends:

• Rural demand: recovery from low base (since H2 FY24).
• Urban demand: aided by tax savings + lower loan rates.
• Spending allocation (Elara Capital):
  • Obligatory spends – 39% (↑ 30%).
  • Necessities – 32% (↑ 20%).
  • Discretionary – 29% (↑ 50% of incremental demand).
• Growth categories:
  • Fashion, food services, entertainment (~1%).
  • Personal care, alcohol (~0.5%).
  • Premiumization in essentials.

Sectors Benefitting:

• FMCG: Britannia, Nestle, ITC, HUL, Dabur, Marico, GCPL, Colgate, Honasa.
• Consumer Discretionary & Automobiles: strongest beneficiaries.
• QSR & Online Platforms: Jubilant Food, Nykaa, Eternal.
• Others: Radico Khaitan, Bikaji Foods, Gopal Snacks, Godrej Consumer.

Stock Market Impact:

• HSBC upgrades Britannia & Nestle (PE multiples ↑).
• Revenue gains: 0.1–1.7% (FY27E).
• EBITDA improvement: 0.3–6.6%.
• Impulse categories (biscuits, snacks, chocolates) → highest benefit.

Significance:

• Broad-based revival of aggregate demand post-COVID.
• Shift in consumer behavior with higher discretionary spending.
• Boost to equity markets via consumption-linked stocks.
• Aligns with inclusive growth and pro-consumer policies.
  
  Updated: Sep 26, 2025, 6:26 PM | TOI