FX.co ★ India's GDP Could Surpass 6.3%–6.8%, Driven by Tax Cuts

The Indian government projects that GDP growth for the fiscal year 2025–26 may surpass the anticipated rate of 6.3% to 6.8%, mainly due to increased consumption spurred by recent reductions in GST rates, coupled with robust GDP performance in the first quarter. Finance Minister Nirmala Sitharaman conveyed optimism that the boost in revenue, driven by heightened consumer spending, would compensate for the estimated ₹48,000 crore shortfall in GST revenue caused by the tax cuts on various items. Consequently, she assured that there would be no adverse effects on public finances and that this move would contribute positively to GDP growth. "Therefore, I do not anticipate any impact on my fiscal deficit or fiscal management. I will adhere to my fiscal deficit target of 4.4% of GDP," Sitharaman stated in an interview with PTI, as covered by The Economic Times. Recently, the GST Council, led by Sitharaman, approved a new two-tier tax structure of 5% and 18%, along with a 40% slab for specific items.