Prime Minister Narendra Modi has announced a sweeping overhaul of India’s Goods and Services Tax (GST) regime, marking a pivotal moment in the country’s fiscal reform journey. The changes include the elimination of the controversial 28% tax slab and a reduction in the 12% category to 5% for a wide range of consumer products. The reforms, which are expected to cost the government ₹20,000 crore annually in foregone revenue, aim to simplify compliance and increase consumer demand.
While economists express concern about the fiscal impact, the reform has been positively received by businesses and consumers alike. “This is a bold political move, and it will certainly boost consumption,” said Ritu Mehra, a policy analyst at the Indian Institute of Finance. “More importantly, it streamlines tax compliance for small and medium enterprises.”
The reforms come at a critical juncture, just months before key state elections. Political analysts view it as a strategic maneuver to reaffirm the government’s pro-business credentials.
Simultaneously, the move could boost GDP by an estimated 0.6%, according to a report by Credit Suisse. Stock markets responded enthusiastically, with the Nifty and Sensex opening higher and the rupee gaining against the dollar. This sentiment was bolstered by declining global oil prices, offering additional macroeconomic stability.
Overall, the GST overhaul reflects the government’s dual objective: to reinvigorate the economy ahead of political contests and to set the stage for a broader economic transformation in the run-up to the 2026 Budget.
By Meenakshi Jain, Economic Correspondent, Industrial Front