The recent GST rate cuts are expected to ease inflation over the next year and provide an upside bias to India's growth prospects, according to the Finance Ministry's latest Monthly Economic Review.
The ministry noted that while the GST reforms are a positive step, uncertainties and risks remain, particularly from external trade disruptions. "This is not the time to drop our guard. Uncertainties persist, but for now, the risks appear manageable," it said.
Risks from Trade and External Factors
The report highlighted that ongoing tariff uncertainties could affect export sectors, potentially spilling over to domestic employment, income, and consumption. The recent US fee hike for new H1B visa-seekers serves as a reminder of trade-related risks impacting the services sector, which was previously largely unaffected.
Reform Agenda to Cushion Economy
The central government's reform-driven agenda, including tax rationalisation and macroeconomic measures, is expected to shield the economy from adverse effects of global trade shocks. The Ministry emphasised that steady growth will continue, driven by macroeconomic discipline, adaptive economic diplomacy, and prudent policymaking.
"The near-term outlook is characterised by steady, reform-driven growth, with ongoing vigilance warranted against external shocks and global market volatility," the ministry concluded.
Implications for Businesses and Consumers
With the GST rate cuts, consumers can expect lower prices on key goods and services, while businesses benefit from reduced tax burdens, potentially boosting production and investment. Analysts say this move could provide a strong stimulus to domestic consumption ahead of the festive season.
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