Moderate impact of GST cuts on fiscal deficit; inflation may lower 50-90bps

Besides, a cut in the tax rate on nearly one-fourth of the essential and household items contained in inflation basket may lead to a moderation of 50-90 bps in retail inflation over next 12 months

Despite a potential net revenue loss of ₹48,000 crore to the government due to the goods and services tax (GST) rates rejig effective September 22, it may have a modest fiscal impact of 5-40 basis points (bps) in the current financial year (FY26) as it might trigger an increase in overall demand, leading to higher growth. This impact too can be absorbed if the Centre goes for a compression in the capex by a mere 5 per cent, reckon analysts.

 

Besides, the cut in the tax rate on nearly one-fourth of the essential and household