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Informist, Friday, Sept. 26, 2025

 

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--Fin min: GST rationalisation to further provide boost consumption growth 
--CONTEXT: Comments from fin min's Monthly Economic Review report for August 
--Fin min:India econ outlook optimistic despite turbulent global environment 
--Fin min: Domestic demand to continue supporting growth in Oct-Mar 
--Fin min: Inflation expected to remain well under control 
--Fin min:GST rate rejig may lead to one-time fall in inflation over next yr 
--Fin min:Need to monitor US H-1B visa fee impact on remittances, svcs trade 
--Fin min: See further upside bias to India growth prospects on reform push 
--Fin min: Tariff uncertainties may impact India's export sectors 
--Fin min: Tariff uncertainties may impact employment, income, consumption 
--Fin min: Tariff, trade risks appear manageable for now 
--Fin min: Govt's reform agenda may cushion econ against trade disruptions

 

NEW DELHI – India's economic outlook remains optimistic in the face of turbulence in global trade and a troubled geopolitical environment with domestic demand expected to continue supporting growth in the second half of 2025-26 (Apr-Mar), the finance ministry said Friday. 

 

"Domestic components of demand have played a key role in supporting growth and (are) expected to remain so in the next half year as well," the finance ministry said in its Monthly Economic Review report for August. India's GDP grew at a five-quarter high pace of 7.8% in the June quarter.

 

India's domestic demand is likely to continue supporting GDP growth given the strong impetus to consumption from the goods and services tax rationalisation, the ministry said in its report. "Additionally, it is likely to improve demand visibility for firms, enabling them to expand investment in additional capacities," the ministry added.

 

The GST Council agreed on Sept. 3 to overhaul the indirect tax regime by consolidating the four-slab GST structure of 5%, 12%, 18%, and 28% into a two-slab structure of 5% and 18%. The council also introduced a new GST rate of 40%, to be imposed on sin and luxury goods. The new GST rates took effect Monday.

 

The GST rate rejig may also lead to a one-time reduction in inflation over the next year, the ministry said. Besides, with the prospects of a good winter crop and replenished reservoir levels, inflation is expected to remain under control. The CPI inflation print has been below 4% in each of the last seven months.

 

However, this is not the time to drop the guard because risks persist with the shift in US trade and visa policies, according to the ministry. The White House imposed 50% tariff on Indian goods in August and there is significant uncertainty about these tariffs as New Delhi and Washington engage in negotiations for a trade deal.

 

If the tariff uncertainties persist, there will be an impact on export sectors, with a spillover risk to domestic employment, income, and consumption, the ministry said in its report. "The recent US imposition of a one-time fee of $100,000 for all future H-1B visas cause disruptions, the impact of which--particularly on the growths of future remittances and service trade surpluses--will need close monitoring if the restrictions persist," it added. "For now, the risks appear manageable, but they are there."

 

Amid these heightened external sector risks, the government recognised the need to strengthen domestic demand and announced the rationalisation of the GST regime, the ministry said, adding that the move will provide momentum to the economy, but further regulatory reforms and infrastructure developments will be needed to sustain the momentum. "The Union government's reform agenda is expected to cushion the economy against the adverse effects of trade disruptions," as per the report. 

 

"With the reform push, there is a further upside bias on the growth prospects of the country," the ministry mentioned in its monthly report. The finance ministry has projected GDP growth for FY26 to be in the range of 6.3-6.8%.  End

 

Reported by Krity Ambey and Shubham Rana

Edited by Rajeev Pai

 

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