GST rate cuts, I-T relief to have multiplier effect on GDP, says CEA Nageswaran
Chief Economic Advisor V Anantha Nageswaran
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The GST rate cut, combined with Income Tax relief announced in the Budget, will boost GDP, said Chief Economic Advisor V Anantha Nageswaran on Monday.
“The GST 2.0 is a very significant landmark reform. I am very confident that it will provide a very significant boost to domestic demand. Coming on top to the indirect taxes are the concessions and relief announced as part of the Budget. Taking a multiplier effect, these will quite definitely boost the GDP numbers,” said Nageswaran while speaking at Network18’s Reforms Reloaded 2025 summit.
Further, he said the total impact of the multiplier effect due to direct tax relief (I-T cuts) and indirect tax relief (GST rate cuts) on the economy will be more than ₹2.5 lakh crore, though some other uncertainties may dilute the effect, he added. When asked about the revenue impact of GST rate cuts on States, Nageswaran said despite prior rate cuts, the annual revenue collection of States has gone higher up over the years. “The reduction in effective GST rate did not result in the decline in revenue,” he said.
There are apprehensions on fiscal deficit as GST rate cuts are expected to have fiscal implication of ₹48,000 crore. At the same time, direct tax collection, though it turned positive in September, is less than Budget estimate. However, Nageswaran is confident of meeting the fiscal deficit estimate of 4.4 per cent in the current fiscal. “We had good non-tax revenue growth. Overall revenue growth has been on track. The festival season will continue till the end of the year. We are confident that the fiscal math will hold very well for the current financial year,” he said.
Trump tariffs
Talking about effect of Trump tariffs on GDP, he 0.4-0.5 per cent reduction is expected from India’s trend growth of 6.5 per cent this year, and 1 per cent reduction is likely next year. “But now due to GST reforms, the impact may be lower,” he said while adding that in medium- to long-term, FDI will not be impacted. GST, deregulation may act as catalyst for higher FDI. “Even with additional tariffs, medium- to long-term investment attractiveness of India will not be impacted, he added.
For the second quarter (July-September), he said that based on high frequency indicators, GDP number remains close to the 7 per cent mark.
Published on September 22, 2025
