GST reset likely to boost demand outlook: Finance ministry report

NEW DELHI: The lower GST rate is expected to support a positive demand outlook by reducing the tax burden on consumers and businesses, a finance ministry report said on Monday but cautioned that global uncertainties pose downside risks to the growth outlook. The ministry’s monthly economic report for Sept said strong performance in the industries and services sector, along with a stable labour market, will further enhance domestic demand. “Nevertheless, global uncertainties warrant caution and will continue to affect external demand, presenting downside risks to the growth outlook… The implementation of various growth-enhancing structural reforms and govt initiatives, including GST 2.0, is expected to mitigate some of the negative impacts of these external challenges,” it said. The report said growth outlook for FY26 remains strong, supported by domestic demand, favourable monsoon conditions, lower inflation, monetary easing, and positive effects of GST reforms. IMF and RBI have revised growth forecasts for India for FY26 upwards from 6.4% and 6.5% to 6.6% and 6.8%, respectively. The report said that recent policy measures, including GST rate rationalisation, are expected to keep inflation moderate, while supporting consumption demand. Prices are likely to remain soft in FY26. It said RBI’s efforts to maintain adequate liquidity within the banking system have played a key role in ensuring availability of resources for strengthening economic activities. The transmission mechanism in money and credit markets continues to operate smoothly, reflecting the effectiveness of these measures. The report said govt has been focused on making the Indian economy resilient to external vulnerabilities through structural reforms.