GST Reforms Could Shield India from US Tariff Shock: Report

India’s economic resilience may get a boost as upcoming GST reforms and tax reductions are expected to counterbalance the impact of US tariffs. These policy moves could support consumption and maintain GDP growth above 6% through the decade.

GST Reform Could Offset US Tariff Pressure

According to a note by BMI, a Fitch Solutions company, the Indian government’s plan to streamline the GST structure aims to stimulate consumption and reduce tax burdens across sectors. This reform is anticipated to mitigate the growth drag caused by a rise in US tariffs under Donald Trump's policies. Projections suggest that India’s GDP will remain above 6% this decade, despite facing external headwinds.

The reform includes a two-slab tax structure that may benefit industries such as automobiles, financial services, cement, and consumer staples. These changes are expected to enhance profitability and support broader economic activity.

Economic Growth to Remain Steady Despite External Pressures

India is expected to remain among the fastest-growing emerging market economies in Asia throughout this decade.

India’s real GDP growth is forecast to gradually slow but stay above 6%, slightly under the pre-pandemic average of 6.5% from 2010 to 2019. Productivity growth is also estimated at around 5% for the coming decade, contributing to steady economic performance. In the near term, FY2025/26 growth may dip to 5.8%, followed by 5.4% in FY2026/27, due to the impact of increased tariffs.

Read More: US Tariffs Impact ₹4.22 Lakh Crore Indian Exports: Key Sectors & Backup Plan Revealed!

GST and Income Tax Cuts to Drive ₹5,31,000 Crore Consumption Surge

According to the SBI Research report, the combined effects of GST reforms and recent income tax reductions could lift consumption by ₹5,31,000 crore, or approximately 1.6% of GDP. This rise in consumer spending would further stabilise growth and support sectors heavily reliant on domestic demand.

India Retains Stable Economic Outlook

Despite global trade tensions, India maintains a strong macroeconomic position with a stable credit outlook. Structural reforms, including GST changes, are expected to play a key role in sustaining investor confidence and promoting long-term growth.

Conclusion

India’s economy is poised to withstand the impact of external shocks such as US tariffs through a combination of GST reforms and tax relief measures. With consumption set to rise and growth projected above 6%, the country remains one of Asia’s strongest emerging market performers through the decade.

Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in securities are subject to market risks. Read all related documents carefully before investing.