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Key Points

India's Chief Economic Advisor is highly optimistic about the economic impact of recent reforms. He believes the GST 2.0 overhaul and income tax cuts will significantly boost domestic demand. These measures are expected to help the economy grow towards the upper end of its projected range. Furthermore, he expressed confidence that these reforms will protect India from global economic headwinds.

Key Points: CEA Nageswaran Says GST 2.0 and Tax Cuts to Boost GDP Growth

  • Combined direct and indirect tax relief to exceed Rs 2.5 lakh crore for the economy
  • CEA confident in achieving 4.4% fiscal deficit target for FY26
  • Q2 GDP growth may remain close to 7% supported by strong indicators
  • GST reforms expected to cushion the economic impact of US tariff measures
  • Medium to long-term FDI flows into India are not expected to be hampered
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GST rate cuts, income tax relief to have multiplier effect on GDP numbers: CEA Nageswaran

India's CEA V Anantha Nageswaran expects GST reforms and income tax relief to have a Rs 2.5 lakh crore impact, pushing FY26 GDP growth towards 6.8%.

"The GST 2.0 is a very significant landmark reform. I am very confident that it will provide a very significant boost to domestic demand. - V Anantha Nageswaran"

New Delhi September 22

India's Chief Economic Advisor (CEA) V Anantha Nageswaran on Monday said that the recently implemented GST 2.0 reforms, coupled with income tax relief announced in the Union Budget, will have a multiplier effect on the economy, pushing FY26 growth towards the upper end of the 6.3 to 6.8 per cent range.

Speaking at the Network18 Reforms Reloaded 2025 summit in Delhi, Nageswaran said, "The GST 2.0 is a very significant landmark reform. I am very confident that it will provide a very significant boost to domestic demand. In addition to the indirect taxes, there are concessions and relief announced as part of the Union Budget. Taking a multiplier effect, these will quite definitely boost the GDP numbers."

Nageshwaran noted that the combined impact of direct tax relief through income tax cuts and indirect tax relief through GST rate reductions will be over Rs 2.5 lakh crore. He, however, added that some other uncertainties may dilute the effect.

On concerns over the revenue impact of GST rate cuts on states, the CEA said experience shows that despite rate reductions, collections have risen. "Despite prior rate cuts, the annual revenue collections of these states have gone higher up over the years," he said.

The CEA also expressed confidence in achieving a gross fiscal deficit target of 4.4 per cent of GDP in FY26. "We had good non-tax revenue growth. Overall revenue growth has been on track. The festival season will continue till the end of the year. We are confident that the fiscal math will hold very well for the current financial year," he said.

On quarterly growth, the CEA indicated that India's Q2 GDP may remain close to 7 per cent, supported by high-frequency indicators. "The impact of US tariffs may be muted in the current year, but that will be compensated by GST rate reductions," he noted.

Addressing concerns over US President Donald Trump's tariff measures, Nageswaran said that while India's growth was expected to face a 0.4-0.5 per cent reduction this year and around 1 per cent next year, GST reforms could cushion the blow. "But now due to GST reforms, the impact may be lower," he added.

Looking ahead, the CEA underlined that medium-to-long-term foreign direct investment (FDI) flows into India will not be hampered. "In the medium to long term, FDI will not be impacted. GST and deregulation may act as catalysts for higher FDI. Even with additional tariffs, medium to long term investment attractiveness of India will not be impacted," noted Nageswaran.

- ANI

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Reader Comments

R
Rohit P
Rs 2.5 lakh crore relief sounds impressive, but I'm concerned about the fiscal deficit target. Hope the government manages revenue collections properly. The states' share should not be compromised.
A
Arjun K
Good to see CEA addressing Trump's tariff impact head-on. India's domestic market is strong enough to absorb external shocks, especially with these reforms. Make in India getting stronger! 💪
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Sarah B
As someone working in manufacturing, I can see how simplified GST will help SMEs. Less compliance burden means more focus on business growth. Hope the implementation is smooth this time.
V
Vikram M
The multiplier effect theory sounds good on paper, but will it reach common people? Need to see price reduction in essential goods and services. Otherwise, it's just numbers game.
M
Michael C
Positive news for foreign investors. GST reforms and consistent policy direction make India attractive despite global uncertainties. FDI confidence is crucial for long-term growth.
K
Kavya N
Festival season boost combined with tax relief should create positive sentiment. Hope small businesses and retailers benefit the most from increased consumer spending. 🪷

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