Spurt in consumption to meet fiscal deficit target of 4.4%: Sitharaman

Finance Minister Nirmala Sitharaman has expressed confidence that revenue buoyancy driven by spurt in consumption will take care of the estimated GST shortfall of ₹48,000 crore following reduction in tax rates on a host of items, and hence there will be no impact on public finances but definitely bolster GDP growth.

She also emphasised that consumption boost to be provided by landmark GST reform and better-than-expected first quarter GDP growth number may help in exceeding the projected pace of 6.3-6.8 per cent for FY26.

Asked about impact of GST rate cuts on fiscal deficit, Sitharaman said, ₹48,000 crore financial implication is a static number based on a base year, but when it gets implemented, base situation changes.

"So, I think the consumption spurt from September 22 will increase income buoyancy. To a large extent, this ₹48,000 crore amount we will be able to make it up this year itself. So I don't see an impact on my fiscal deficit or my fiscal management. I will stick to my numbers (of 4.4 per cent of GDP)". Sitharaman told PTI in an interview.

The Centre estimates the fiscal deficit during 2025-26 at 4.4 per cent of the GDP, or ₹15.69 trillion.

Last week, the all-powerful GST Council headed by Sitharaman approved a two-tier structure of 5 per cent and 18 per cent taxes, as well as a 40 per cent slab.

Nearly 400 products - from soaps to cars, shampoos to tractors and air conditioners - will cost less when the rejig of the GST is effective from the first day of Navaratri on September 22. Premiums paid on individual health and life insurance will be tax-free.

In the revamped GST structure, most daily food and grocery items will fall under the 5 per cent GST slab with bread, milk and paneer attracting no tax at all. EVs and small cars will be taxed at 5 per cent while other white goods at 18 per cent - slabs that are lower than current rates.

Calling the landmark GST overhaul a 'people's reform', Sitharaman said that rationalisation of rates for a wide swath of products will benefit every family.

"This is a reform which touches the lives of all 140 crore people. There is no individual in this country who is untouched by GST. The poorest of the poor also have something small that they buy, touched by GST," she said.

Asked if there can be upward revision in the GDP growth projection for the current fiscal helped by the consumption boost and better than expected GDP number of 7.8 per cent for the first quarter, the finance minister said, "possible, very much possible."  The Economic Survey tabled in parliament in January had projected real economic growth of 6.3-6.8 per cent for FY26.

The gross domestic product (GDP) growth of 7.8 per cent in the first quarter of the ongoing fiscal year was mainly driven by good showing by the farm sector, and also helped by services like trade, hotel, financial and real estate.

The previous highest pace of growth in the country's GDP was recorded at 8.4 per cent during January-March 2024, as per the data.

India remains the fastest-growing major economy, as China's GDP growth in the April-June period was 5.2 per cent.