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Reforms set to boost consumption, won't hit fiscal numbers: Moody's

Economic Times

Economic Times · 2d ago

Reforms set to boost consumption, won't hit fiscal numbers: Moody's

Moody's reports that India's recently announced GST reforms will boost private consumption and economic growth without significantly affecting fiscal numbers. While revenue buoyancy might be impacted short-term, the government is expected to manage fiscal consolidation by slowing capital expenditure. Alongside income tax exemptions, the rate cuts aim to increase household consumption, which constitutes about 61% of GDP. However, foregone revenue from the new tax structure could exceed government estimates, potentially increasing fiscal pressure.

Related News

Will India’s consumption surge drive markets? Hiren Ved’s take on festive season optimism

Economic Times

Economic Times · 24d ago

Will India’s consumption surge drive markets? Hiren Ved’s take on festive season optimism

India's consumption revival, driven by tax cuts, GST reforms, and RBI measures, is set to boost festive spending, benefiting FMCG, quick commerce, and retail sectors. Defence also presents long-term investment potential due to rising domestic capabilities. While tax cuts and credit growth are yet to fully impact, strong domestic consumption should cushion any export declines, boosting overall macro stability. Investors can gain from focusing on quick commerce and large retailers for consumption-driven growth.

Anand Mahindra calls for ‘more reforms to unleash consumption and investment’ after GST rate cuts

Economic Times

Economic Times · 7d ago

Anand Mahindra calls for ‘more reforms to unleash consumption and investment’ after GST rate cuts

Anand Mahindra, Chairman of Mahindra Group, advocates for more reforms beyond recent GST rate cuts to boost consumption and investment in India. After Finance Minister Nirmala Sitharaman announced changes lowering taxes on various items, Mahindra called for sustained reform momentum to strengthen the economy. He believes more reforms can expand the economy and enhance India's global influence, emphasizing the need for continuous action to achieve economic goals. Other industry leaders also praised the GST rationalization.

GST reform to offset growth drag from 50 pc reciprocal tariff: BMI

Economic Times

Economic Times · 14d ago

GST reform to offset growth drag from 50 pc reciprocal tariff: BMI

The proposed GST reforms aim to lower tax rates on common items, boosting consumption and offsetting the impact of 50% US tariffs, as per BMI, a Fitch Solutions company. Although GST has become a significant revenue source, the fiscal impact of the reform is expected to be mild. The GST reform proposes new rates of 5% or 18% for most goods. These reforms pose a slight upside risk to GDP growth forecasts, according to BMI.

India seen among Asia’s fastest growing economies as Trump’s tariff meets PM Modi’s GST power move

Economic Times

Economic Times · 14d ago

India seen among Asia’s fastest growing economies as Trump’s tariff meets PM Modi’s GST power move

India is projected to maintain robust GDP growth above 6% despite new US tariffs affecting exports, according to BMI, a Fitch Solutions company. Fitch suggests PM Modi's GST reform could offset the tariff impact, boosting private consumption. India’s economy benefits from strong domestic consumption, fiscal stability, and demographic advantages. While facing external tariff challenges, India remains one of Asia's fastest-growing economies, with reforms enhancing growth prospects and potentially raising GDP growth rates.

Crisil maintains India's FY26 GDP forecast at 6.5%, private consumption to steer growth

Economic Times

Economic Times · 10d ago

Crisil maintains India's FY26 GDP forecast at 6.5%, private consumption to steer growth

Crisil maintains India's GDP growth forecast for FY26 at 6.5%, with private consumption expected to drive growth. Despite risks from US tariffs and a slowing global economy, India's real GDP grew by 7.8% in the April-June quarter. Government forecasts a 6.3-6.8% GDP growth for the fiscal year. Factors supporting growth include a healthy monsoon, agricultural production, RBI rate cuts, fiscal policy, and expected GST reforms, potentially boosting consumer spending.

India government bonds set to gain on fiscal relief, lower US yields to aid

Economic Times

Economic Times · 6d ago

India government bonds set to gain on fiscal relief, lower US yields to aid

Indian government bonds are set to gain due to reduced concerns over fiscal slippage, stemming from lower-than-expected revenue loss after tax cuts. Falling U.S. Treasury yields also support this trend. The benchmark 10-year bond yield is anticipated to trade in the 6.46%-6.50% range. The adjustments in Goods and Services Tax rates were intended to boost consumption, with net revenue loss much lower than the market estimates, easing borrowing concerns.

No immediate upgrade of India's sovereign rating: Moody’s

YourStory

YourStory · 7m ago

No immediate upgrade of India's sovereign rating: Moody’s

Moody's Ratings has decided not to upgrade India's sovereign rating immediately, despite the government's prudent fiscal management and projected deficit reduction in the Budget. India's current rating of "Baa3" with a stable outlook reflects concerns over its debt burden and debt servicing costs. While Moody's acknowledges India's fiscal and inflation control strides, further reduction in debt burden and enhanced revenue measures are essential for a rating upgrade. Despite challenges, India retains a favorable growth outlook among G20 economies.

Online shoppers press pause button ahead of GST changes; festivities to boost sales: Analysts - The Economic Times

Economic Times

Economic Times · 11d ago

Online shoppers press pause button ahead of GST changes; festivities to boost sales: Analysts - The Economic Times

Anticipation of GST reforms has led e-shoppers to delay purchases, particularly in electronics, expecting lower tax rates. Analysts predict a temporary dip in sales will reverse with festive demand. The two-rate GST system is expected to boost consumption and e-commerce sales. Despite current caution, the festive shopping culture and GST rationalization are expected to drive a strong rebound in sales, enhancing consumer confidence and affordability during the festive season.

Banks sense an opportunity in GST gain for retail, MSME

Economic Times

Economic Times · 4d ago

Banks sense an opportunity in GST gain for retail, MSME

Recent GST reforms in India, including tax cuts, are expected to boost credit demand in retail and MSME sectors. Bankers anticipate increased consumption and working capital needs, particularly in semi-urban and rural areas. The 5% GST rate facilitates input tax credit benefits while easing compliance for MSMEs, enhancing their creditworthiness. With GST rate cuts, banks and NBFCs stand to benefit from rising loan disbursements, bolstered by surplus liquidity from a reduced cash reserve ratio.

GST rate reduction has higher multiple effect on economy, than income tax cut: Ambit Capital

Economic Times

Economic Times · 14d ago

GST rate reduction has higher multiple effect on economy, than income tax cut: Ambit Capital

Ambit Capital's report suggests that a reduction in Goods and Services Tax (GST) rates has a greater multiplier effect on GDP growth (1.08x) compared to direct tax cuts, as GST is an indirect tax impacting all consumers. GST reforms could simplify the tax system, potentially enhancing compliance and expanding the tax base. Although GST rationalization may cause revenue losses, especially for states, it can boost discretionary consumption, particularly during peak demand seasons.

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