In a significant move poised to impact consumer spending and business operations, the Indian government has initiated major Goods and Services Tax (GST) reforms, reducing the GST slabs to 5% and 18%. This rationalization is anticipated to make a wide range of consumer goods, including food, apparel, electronics, and home appliances, more affordable.
Union Minister of Commerce & Industry, Piyush Goyal, has urged industries to pass on the full benefits of these GST rate cuts to consumers to stimulate demand, create jobs, and foster economic growth.
Early responses from the corporate sector indicate compliance, with companies like Lexus, Nissan, and Audi India already announcing price reductions on their models to reflect the GST benefits. While the reforms are largely welcomed, an SBI report projects a potential revenue loss of ā¹3,700 crore for the government due to these GST changes. Furthermore, Reliance Industries Limited Chairman and Managing Director, Mukesh Ambani, has lauded the GST 2.0 reforms as a progressive step towards making products and services more affordable, suggesting they could accelerate India's GDP growth towards double digits.
Trade and International Relations
Amidst global trade uncertainties and the impact of US tariffs, India is actively bolstering its international trade relations. The nation is stepping up Free Trade Agreement (FTA) talks with Qatar and the European Union. These discussions are crucial as India seeks to reduce its dependence on the US, currently its largest export market, and explore new avenues for its engineering goods, petrochemicals, and agricultural products.
The engineering goods export body has already flagged significant job losses in the sector due to US tariffs, underscoring the urgency of finding alternative markets. Similarly, Kolkata's leather units are eyeing the UK and EU markets for relief as US tariffs on leather products have doubled to 50%.
In a strategic move, India and Israel have also signed a bilateral investment treaty aimed at promoting and protecting investments, further strengthening economic ties between the two nations. External Affairs Minister S. Jaishankar, during a virtual BRICS meeting, emphasized the importance of fair and transparent economic practices in global trade, advocating against protectionism.
Economic Indicators and Corporate Developments
Recent data indicates that India's unemployment rate stands at 2%, ranking as the lowest among G20 nations, according to a WEF report cited by Mandaviya. While consumption is expected to drive revenue buoyancy and help meet the fiscal deficit target of 4.4%, the nominal GDP growth might miss the FY26 target due to soft inflation.
In corporate news, the board of Infosys is set to consider a share buyback proposal on September 11. E-commerce giant Amazon has announced a substantial investment of ā¹2,000 crore to prepare for the upcoming festive rush, anticipating over 140 crore customer visits. Meanwhile, food delivery platforms Zomato and Swiggy are facing a potential additional GST burden of ā¹180-200 crore as delivery fees are now subject to an 18% GST.