Centre says that the GST reforms are expected to lower the tax burden on consumers, boost consumption, and provide a cushion against tariff impacts
Highlighting that inflation is expected to remain well under control, with replenished reservoirs auguring well for the winter crop, the Ministry of Finance has noted that the revision in Goods and Services Tax (GST) rates may lead to a one-time reduction in inflation over the next year.
In its monthly economic report, the department of economic affairs highlighted that after a disinflationary period of nine consecutive months, headline inflation turned up to 2.07 per cent in August 2025. In all major six categories, positive price movement appeared, ranging from 0.05 per cent to 5 per cent.
“The deflationary trend in food articles, seen over the past two months, persisted in August 2025 but eased to – 0.69 per cent from -1.76 per cent in July. Except for pulses, vegetables, and spices, most other food items recorded positive price movements during the month,” the report noted.
Centre emphasised that India’s economic outlook remains broadly optimistic despite a turbulent international environment marked by geopolitical uncertainties and shifting trade dynamics. The move to cut GST rates is expected to lower the tax burden on consumers, boost consumption, and provide a cushion against tariff impacts. Additionally, it is likely to improve demand visibility for firms, enabling them to expand investment in additional capacities, the report added.
“At the same time, this is not the time to drop our guard. Uncertainties and risks persist. If tariff uncertainties persist, there will be an impact on export sectors with spillover risk to domestic employment, income and consumption. Newer markets will take time to mature and contribute to export growth as established markets have,” the report cautioned.
The report highlighted that government’s reform agenda is expected to cushion the economy against the adverse effects of trade disruptions. Regulatory reform and infrastructure development will be key to sustaining momentum, it added.
The near-term outlook is characterised by steady, reform-driven growth rooted in macroeconomic discipline and adaptive economic diplomacy, with ongoing vigilance warranted against external shocks and global market volatility.
