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Informist, Friday, Sept. 5, 2025

 

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--TV:Sitharaman: GST, income-tax move to absolutely move consumption needle
--CONTEXT: Sitharaman's comments in interview with CNBC-TV18
--TV:Sitharaman: See revenue buoyancy on strong consumption despite tax cuts
--TV: Sitharaman: Will not cut down on public sector capex
--TV:Sitharaman:Govt capex to stay strong while sticking to fisc consolidation
--TV: Sitharaman: Fuel, alcohol to stay out of GST regime in near term
--TV:Sitharaman:To stick to fisc glide path despite revenue gap on GST rejig
--TV: Sitharaman: Aware of profiteering concerns
--TV: Sitharaman: Expect cos to pass on benefits from GST cut to consumers
--TV: Sitharaman: Regulators must not micro-manage sectors
--TV: Sitharaman: See significant enthusiasm in pvt sector for capex
--TV: Sitharaman: Regulators should have soft-touch approach
--TV: Sitharaman: GST-like reforms will offset US tariff threats
--TV:Sitharaman:Govt to soon come with plan for exporters hit by 50% US duty
--TV: Sitharaman: Cabinet to soon clear package to aid exporters
--TV: Sitharaman: India will continue to buy Russian oil
--TV: Sitharaman: Need more talks on mkt access, trade barriers with China
--TV: Sitharaman: Have relaxed norms for Chinese investment in some sectors
--TV: Sitharaman: IDBI Bank stake sale likely this fiscal year
--TV: Sitharaman: Rupee not weakening, dollar strengthening

 

NEW DELHI – The government's latest reforms to the goods and services tax will offset the impact on the Indian economy from the 50% tariff imposed on Indian goods by the US, the country's top export destination, according to Finance Minister Nirmala Sitharaman. In fact, the latest cut in GST rates and the income tax rebate announced earlier in the Budget for the current financial year will together move the needle on consumption and boost demand, she said Friday.

 

Considering the strong consumption following the tax cuts, the government also expects to see buoyancy in revenue, the finance minister said in an interview with CNBC-TV18. Simultaneously, the government will continue to keep its own capital expenditure robust while adhering to fiscal consolidation norms, she added.

 

This week, the GST Council approved a two-slab structure of 5% and 18%, with a new special rate of 40% for sin goods and luxury items, effective Sept. 22. In the Budget for 2025-26 (Apr-Mar), Sitharaman had lowered income tax rates and announced a tax rebate on income up to INR 1.2 million. There will be some revenue gap due to these cuts, but the government will stick to the fiscal glide path and meet its fiscal deficit target, the minister said Friday. The government has projected a fiscal deficit target of 4.4% of GDP for FY26.

 

While there are concerns of profiteering by companies after the GST cuts, the government expects the companies to pass on the benefits to consumers without the intervention of any authority, Sitharaman said. There have been instances in the past when the benefits of GST rate cuts have not been passed on to consumers. Instead, companies have increased their profit margins. In November 2017, after the council reduced GST rates on restaurants to 5% from 18% and 12%, anti-profiteering investigations were initiated against some restaurants for allegedly not passing on the benefit of reduced taxes to customers.

 

Goods such as fuel and alcohol are likely to remain out of the GST regime for the near term at least, Sitharaman said. State governments still impose value-added tax and service tax on these items.

 

The government is hopeful of strong consumption demand in India, which will also encourage the private sector to incur capital expenditure, Sitharaman said. The private sector is already showing a significant enthusiasm for capital expenditure, she added.

 

The government has also worked out a plan to support Indian exporters who are affected by the 50% tariff imposed by the US, the minister said. "The Union Cabinet will soon clear a package for exporters," she said. Around 55% of India's exports to the US are now subject to 50% duty. It poses a risk to nearly $50 billion worth of Indian exports to the US from labour-intensive sectors such as chemicals and fertilisers, textiles and apparel, gems and jewellery, shrimps and seafood, furniture and beddings, and machinery and mechanical appliances.

 

The rupee has depreciated over 3% against the dollar so far in 2025, hitting a record low of 88.3650 a dollar Friday amid worries relating to US tariffs. Sitharaman believes the rupee has depreciated only against the dollar--it is well-placed against other currencies. So, actually, the rupee has not weakened; instead, the dollar has strengthened, she said. However, the dollar index has fallen 9.7% in 2025.

 

The 50% tariff imposed by the US on goods imports from India comprises 25% reciprocal tariff and 25% punitive tariff for India's crude oil imports from Russia. US President Donald Trump wants New Delhi to cut trade and military ties with the Kremlin. But, according to Sitharaman, India has not changed its mind on buying Russian oil and will continue to purchase the commodity.

 

As the India-US partnership stumbles, New Delhi has started focusing on improving its relationship with Beijing. Sitharaman said the government has already relaxed investment norms for China in some sectors, but the two countries need to have more meaningful conversation on trade barriers and market access.

 

To further strengthen the Indian economy, the finance minister believes regulators must stop micro-managing the sectors. Not just financial regulators, all regulating authorities should adapt a soft-touch approach, she said.

 

The government is also likely to conclude the strategic sale of IDBI Bank this year, Sitharaman said. The government had in 2022 invited expressions of interest to sell its 30.48% stake and Life Insurance Corp. of India's 30.24% stake in the bank. The Cabinet Committee on Economic Affairs had given in-principle approval for strategic divestment and transfer of management control in 2021. Friday, shares of IDBI Bank ended flat at INR 88.87 on the National Stock Exchange.  End

 

US$1 = INR 88.26

 

Compiled by Krity Ambey

Filed by Rajeev Pai

 

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