Why have reforms like lower corporate taxes failed to boost consumer confidence?

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Reforms Have Not Revived Consumer Confidence Due to Lingering Economic Shocks and Insufficient Scope

India's recent economic reforms, including corporate tax reductions and eased foreign investment restrictions, have not translated into a significant boost in consumer confidence. This lack of revival is attributed to the lingering effects of past economic disruptions, such as the 2016 demonetisation and the 2017 goods and services tax implementation, which experts suggest have not been fully overcome. Furthermore, the current reform measures are perceived by some as insufficient in scope and impact to address the deep-seated issues plaguing consumer sentiment and demand.
Past Economic Disruptions Continue to Weigh on Sentiment

The Indian economy has struggled to fully recover from significant policy changes implemented in recent years. Experts indicate that the economy has not adequately rebounded from the 2016 demonetisation, which disrupted many small-scale businesses, nor from the nationwide rollout of the goods and services tax in 2017. These events appear to have created a persistent hesitancy among consumers and businesses, hindering a robust return to confidence despite subsequent policy adjustments.
Measures Implemented Have Not Driven Demand

Despite efforts such as the Reserve Bank of India's five consecutive interest rate cuts this year, intended to stimulate lending and economic activity, consumer confidence has not improved. Demand for a wide range of products, from vehicles to everyday consumables, has notably declined. This stagnation in demand is also reflected in rural spending, which saw a substantial 20 per cent plunge in essential items between July 2017 and June 2018, according to previously leaked data.
Reforms Are Perceived as Insufficient

While the government has introduced measures like easing foreign investment rules and slashing corporate taxes, some economists and experts view these actions as "too little, too late." The scope of these reforms is considered by some to be not far-reaching enough to fundamentally alter the economic trajectory or restore widespread consumer optimism. The economy's growth rate of 4.5 per cent in the July-September period, the slowest in over six years, underscores the limited impact of these interventions on overall economic vitality and job creation needs.
Economic Growth Falls Short of Job Creation Requirements

The current economic expansion rate of 4.5 per cent is significantly below the approximately eight per cent growth needed to generate sufficient jobs for the millions of new entrants entering the Indian labour market each year. This persistent gap highlights the ongoing challenge in revitalising the economy to a level that can absorb new workers, a factor that likely contributes to the prevailing uncertainty and subdued consumer confidence. The slump has also led to India losing its status as the fastest-growing major economy to China.

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Why have reforms like lower corporate taxes failed to boost consumer confidence?

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