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Informist, Saturday, Dec. 6, 2025

 

--Sitharaman: To cut customs duty on items considered over optimal rate 

--CONTEXT: Minister Sitharaman speaking at Hindustan Times Leadership Summit 

--Sitharaman: Think overall FY26 GDP growth will be 7% or above 

--Sitharaman: States must be mindful of borrowing, focus on reducing burden

 

NEW DELHI – Finance Minister Nirmala Sitharaman expects the economy to grow over 7% for 2025-26 (Apr-Mar) on the back of demand pickup. "When prices come down...people do buy more. Only when tax rates reach a certain level beyond sustainable level, demand plateaus out. I think that will sustain, overall this year's growth number will be 7% or beyond it as well," Sitharaman said at Hindustan Times Leadership Summit.

 

India's GDP grew at a six-quarter high pace of 8.2% in Jul-Sept. After the strong GDP growth in the September quarter, the Reserve Bank of India Friday raised its GDP growth projection for 2025-26 (Apr-Mar) to 7.3% from 6.8% projected earlier. It also scaled up its growth estimates for the last two quarters of the fiscal, with growth in Oct-Dec now seen at 7.0% against 6.4% projected earlier, and that in Jan-Mar expected at 6.5%, against 6.2?rlier. It raised its GDP growth forecast for the first quarter of the next financial year to 6.7% from 6.4. The RBI gave a GDP growth projection of 6.8% for the September quarter of FY27. 

 

Sitharaman said effect of the income tax relief provided in FY26 Budget and recent goods and services tax rate rationalisation is already visible in spending patterns. She, however, said that she will wait for a few months for a clearer picture to emerge. "Income tax for the assessment side and GST for the festival month, I'll have to see how it plays out in medium term," she said.

 

The Budget increased the tax rebate limit to INR 1.2 million, effectively making income of up to INR 1.2 million entirely exempted from paying income tax. The government aimed at increasing disposable income in the hands of taxpayers to spur demand. Later, on Sept. 3, the GST Council overhauled the indirect tax regime as part of next-generation reforms by collapsing the four-slab GST structure of 5%, 12%, 18%, and 28% to a two-slab structure of 5% and 18%. The decision was implemented from Sept. 22. The introduction of the reduced rates coincided with the festival period. 

 

Contrary to the real GDP growth, nominal GDP growth--measured at current prices--fell to a four-quarter low of 8.7% in the September quarter. The nominal GDP growth was 8.8% for the first half of the year.

 

Sitharaman said she is not worried about low nominal GDP growth, "I think the factors are playing out and they will find their own level. It is also our truth that we want our inflation to be down, the deflator is now where it can reach the bottom most. If anything, it has to rise a bit for stimulating growth".

 

On being asked about the growing trend of state elections being won on the promises of freebies to attract voters, Sitharaman said it is a worry "because their Budget cannot afford it". "They borrow to do this or borrow for something but this continues to be heavy baggage which pulls them down in terms of them not being in a position to service the high cost loans which have been taken few years back," she said.

 

Sitharaman said Centre and certain states have held discussions on debt restructuring. "We are trying to suggest that they may look at restructuring their loans even if it means that they have to payback some of the very expensive loans taken earlier with some penalty. They should do it because some of them are just not able to service their loans," she said.

 

She said that the FY27 Budget will focus on a complete overhaul of the customs structure. "we need to have customs a lot more simplified...to make it more transparent," Sitharaman said.

 

Sitharaman's eighth budget had rationalised customs tariff structure by reducing the number of tariff rates to eight, including the zero rate, from 15 earlier.  End

 

Reported by Sagar Sen

Edited by Akul Nishant Akhoury

 

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