The tax relief announced in the Union Budget will act as a catalyst for the quick service restaurant (QSR) businesses in India, which has seen the beginning of a cyclical upturn in the October-December quarter, multinational investment banking company Goldman Sachs said.
In the Union Budget for 2025-26 presented on February 1, the central government has announced that no income tax will be payable on income up to Rs 12 lakh, providing significant relief to taxpayers, especially the middle class. Earlier, this limit was Rs 7 lakh.
The government expects that taxpayers saving money through lesser income tax will plough back into the economy in the form of either consumption, savings or investments.
In its report titled ‘India QSR: The tide is turning’, Goldman Sachs believes the October-December quarter was the beginning of a cyclical upturn in quick service restaurant (QSR) demand, driven by improving affordability.
QSRs focus on fast food, ranging from burgers, sandwiches, fried foods, nuggets, or pizzas.
In addition, it said the increased disposable income from the recent income tax relief should help accelerate the recovery in the industry starting the first quarter of the 2025-26 financial year.
QSR players are now gaining a share within the food delivery market, Goldman Sachs said.
Notably, QSR players gained market share in the October-December quarter after several quarters of losing market share.
Zomato Gold launch has had a positive impact on Zomato’s gross order value, the growth gap between QSR sales and aggregators’ gross order value has been narrowing. In the October-December quarter, the gap narrowed significantly.
Dine-in sales also seemed to be recovering, which is a positive for QSR operators.
“3QFY25 also saw a sharp recovery in dine-in sales growth at QSR players. QSR dine-in sales growth was 4.2 per cent year-on-year in 3QFY25 after several quarters of negative or low single-digit growth,” the Goldman Sachs report read.
“Domino’s saw some of its takeaway sales (which it reports as part of dine-in) shift to the delivery channel because it has lowered the minimum order value that qualifies for a delivery fee waiver.”
Initially, the demand slowdown started in the QSR sector around the second half of 2022-23, led by high inflation and price hikes.
Four quarters later, the demand slowdown got extended longer than expected because of the impact of geopolitical issues starting the October-December quarter of 2023-24.
“Over the last few quarters, most QSR players have not taken any significant price hikes,” it said, asserting that it helped the recovery process. Some QSR players having introduced several value offerings to their customers also helped in business recovery.
These value-offering initiatives led to the start of a recovery, Goldman Sachs said.
“We believe these value initiatives will continue to drive order-led recovery for the sector going forward, as affordability has improved over the last eight quarters.”
