India's Economy to Benefit from GST Rationalization

Domestic consumption is expected to strengthen following the Indian government's proposed GST rationalization. This move offers crucial support to the economy as it prepares for the impact of the US's 50 per cent duty on Indian imports, according to economists.

Positive Impact on Consumption and Economy

"At a time where consumption demand has been uneven and felt pressure from high inflation and low nominal wage growth over the last couple of quarters, the proposed GST reforms are a positive, especially for essentials, aiding consumption by the lower and middle income class," said Sakshi Gupta, principal economist at HDFC Bank.

QuantEco Research economist Yuvika Singhal added, "Any kind of reduction in taxes is positive for consumption as it leaves higher disposable income in the hands of consumers."

Wide Range of Goods to Be Covered

The proposed rationalization will cover a wide range of goods, from household appliances such as refrigerators and air conditioners to packaged foods and medical supplies.

"It's a much-needed development, and GST rationalisation is the need of the hour, apart from other reforms," said Paras Jasrai, associate director at India Ratings and Research (Ind-Ra).

Looking Ahead

Economists project that increased spending could add 0.6 percentage points to nominal GDP growth over the next 12 months, highlighting the potential long-term benefits of the proposed GST reforms.