GST Cuts Spur Consumption, Expected to Reflect in GDP Growth
The government anticipates that the successful transmission of benefits from the recent Goods and Services Tax (GST) rate rationalization, combined with increased consumer spending, will be reflected in a significant boost to Gross Domestic Product (GDP) growth.
Key Factors for Anticipated GDP Growth
- Full Price Transmission Achieved: The government confirms that the GST rate cuts have been successfully passed on to consumers by businesses (a key requirement of the anti-profiteering law). This ensures that the fiscal stimulus effectively reaches the public.
- Spurred Consumption: The resulting increased affordability on a wide range of goods (including automobiles, electronics, and daily essentials) has spurred consumer demand and sales volumes. Higher consumption is the largest component of GDP, making the tax cuts a direct stimulus measure.
- Economic Cycle Acceleration: The boost in consumer spending is expected to accelerate the entire economic cycle: higher sales necessitate higher manufacturing/production, which leads to job creation and further boosts demand, thereby positively impacting the overall GDP growth rate.
- Policy Success: The government views the tax cuts as a key policy success, validating the belief that rationalizing indirect tax rates can be a powerful and effective method for stimulating economic growth and formalizing the market.
Source :- Indian Express