The Indian automotive world is buzzing with hope and energy! Experts from Incred Research say the domestic auto industry is all set to jump back into action with a strong demand recovery over the next two to three years. What's fueling this optimistic turnaround? The magic mix includes tax relief, salary hikes, and interest rate cuts from the government. Recently, the GST rates took a friendly dip – slashing from 28% to a cozy 18% on many types of vehicles like small cars, two-wheelers under 350cc, and commercial vehicles. This cool move, which started on September 22 after the 56th GST Council meeting, sparked a bright spark in auto sales. The Nifty Auto Index, a key market indicator, had already zoomed up 9% after these GST cuts in August-September 2025. Though it paused a bit recently, analysts believe the engine is roaring to rev up again soon. "We feel macroeconomic stimulus measures like income-tax rate reduction, interest rate cut, and Pay Commission salary revision will drive a two-to-three year demand cycle recovery and therefore we reiterate our Overweight rating for the sector, as forward P/E valuation is just above the 10-year mean level," said the Incred Research report. The numbers back the hype! In the second quarter of the financial year 2026, original equipment manufacturers (OEMs) saw a sparkling double-digit growth in net sales, thanks to an early festive season and more customers cruising into showrooms after the GST rate cut. While higher raw material costs trimmed some profits, clever operating strategies kept earnings margins healthy. On the ground, excitement was palpable. Two-wheeler sales zoomed with mid-teen growth during the August to mid-November festive period. Meanwhile, passenger cars took a gentler ride with mid-single-digit growth. Adding more fuel, the government’s move in October to approve the 8th Central Pay Commission’s Terms of Reference promises handsome salary boosts for central government employees. This means more money in pockets, ready for spending on big-ticket items like automobiles. All these ingredients — tax cuts, salary hikes, and interest rate cuts — are cooking up a perfect recipe for the auto industry’s growth feast. The report highlights that these combined measures could keep demand humming strong and pave the way for exciting times ahead in the Indian auto market.