GST reforms expected to lower inflation, create room for rate cut

A rate cut will also depend on how the central bank assesses growth, post the 50 per cent tariff imposed by the US, with the additional 25 per cent came into effect from late August

The rate rationalisation of goods and services tax (GST) is expected to soften prices, potentially creating room for a rate cut by the Reserve Bank of India’s Monetary Policy Committee (MPC), according to economists. They said if the consumer got the full benefit of the cuts, retail prices could fall between 60 and 80 basis points (bps) over 12 months. 

During the August review of the monetary policy, the central bank projected an average inflation rate of 4.4 per cent during January-March 2025-26 while for the first quarter of next financial year, it was estimated at 4.9 per cent. Since