New Delhi, Oct. 15 -- The much-anticipated festive season may not deliver the usual consumption boost this year, with Ambit Capital warning that weak labour markets, slowing credit, and mounting tariffs could weigh on consumer sentiment despite recent tax cuts.

In its latest economic insights report, Ambit Capital said that while GST and income tax reductions are expected to cost the exchequer nearly Rs 2 lakh crore, the impact on demand is likely to be modest.

It says tax cuts may not lead to a significant consumption boost, "Consumption demand is primarily driven by the income effect, meaning that total demand increases significantly only when incomes rise and remain stable. However, widespread stagnation in formal job markets, with e...