India Implements Major GST Reforms, Eyes Consumption Boost
India has rolled out a significant overhaul of its indirect tax regime, with the new Goods and Services Tax (GST) reforms, termed 'GST 2.0', coming into effect on September 22, 2025. This simplified two-tier structure primarily taxes most goods and services at 5% and 18%, while ultra-luxury or 'sin' goods will face a 40% tax. This move is anticipated to make a wide range of daily essentials, including several food items, cars, and electronics, more affordable for consumers.
Chief Economic Advisor (CEA) V Anantha Nageswaran stated that these GST reforms, coupled with income tax relief announced in Budget 2025, are expected to provide a fiscal boost of over ā¹2.5 lakh crore to the Indian economy. This is projected to significantly stimulate domestic demand and push India's GDP growth towards the upper end of the 6.3% to 6.8% range for FY26. The government aims to spur spending by increasing disposable income, though it also seeks private sector investment to achieve higher growth rates.
Positive Economic Outlook and Fiscal Confidence
CEA V Anantha Nageswaran expressed optimism that the growth momentum from Q1 FY26 would continue into the July-September quarter (Q2 FY26). He highlighted that GST reforms are boosting domestic demand, and the government remains on track to achieve its fiscal deficit target of 4.4% of GDP for FY26. Despite concerns over potential impacts from US tariffs, Nageswaran believes the GST reforms could cushion any adverse effects.
Inflation Projected to Hit Two-Decade Low, RBI Rate Cut Debated
Amidst these reforms, India's inflation outlook appears highly favorable. SBI Research projects the Consumer Price Index (CPI) to fall to an unprecedented low of around 1.1% in October, marking its lowest level since 2004. This sharp easing is attributed to the recent GST cuts and softening prices across various categories. This development has intensified the debate surrounding a potential interest rate cut by the Reserve Bank of India (RBI) in its upcoming September meeting, with some analysts arguing for an early cut to project the RBI as a forward-looking central bank.
H-1B Visa Fee Hike Rattles Indian IT Sector and Stock Market
On the business front, a significant development impacting the Indian IT sector is the US President Donald Trump's decision to impose a substantial $100,000 one-time fee for new H-1B visas. This announcement led to a sharp sell-off in Indian IT stocks, causing the Nifty IT index to tumble by nearly 3%. The Indian equity markets, including Sensex and Nifty, opened lower on September 22nd and 23rd, primarily due to this negative sentiment. The move has also sparked discussions about encouraging Indian talent to focus on domestic innovation and entrepreneurship.
Other Key Business Developments
- **Bullion Market:** Gold prices surged by nearly 1.3% to ā¹1,11,840 per 10 grams, and silver rose over 1.4% to ā¹1,31,930 per kilogram in the Indian bullion market, reaching new all-time highs.
- **Informal Sector:** The government continues to strengthen the informal sector through various welfare measures and financial inclusion schemes, such as the PM SVANidhi scheme for street vendors and the e-Shram portal for unorganized workers.
- **Consumer Protection:** To ensure that the benefits of GST reductions are passed on to consumers, the government has established a dedicated category on the National Consumer Helpline's INGRAM portal and a toll-free number (1915) for complaints regarding revised GST rates.