India's Chief Economic Advisor (CEA) Anantha Nageswaran said that India's FY26 GDP growth will tend towards the upper end of 6.3-6.8 percent range in FY26, following the GST 2.0 reforms which came effect from today.
He was referring to the GDP growth estimate mentioned in the Economic Survey tabled by finance minister Nirmala Sitharaman on January 31 this year.
'GST rate cuts, income tax relief to have multiplier effect on GDP numbers'
"The GST 2.0 is a very significant landmark reform. I am very confident that it will provide a very significant boost to domestic demand. Coming on top to the indirect taxes are the concessions and relief announced as part of the Union Budget. Taking a multiplier effect, these will quite definitely boost the GDP numbers," he said, while speaking at Network18 Reforms Reloaded 2025 summit in Delhi.
The total impact of the multiplier effect due to direct tax relief (income tax cuts) and indirect tax relief (GST rate cuts) on the economy will be more than Rs 2.5 lakh crore, though some other uncertainties may dilute the effect, he added.
Revenue impact on states?
When asked about the revenue impact of GST rate cuts on states, Nageswaran said despite prior rate cuts, the annual revenue collections of these states have gone higher up over the years. "The reduction in effective GST rate did not result in the decline in revenue," he said.
The Chief Economic Advisor of India added that he is confident of 4.4 percent of GDP gross fiscal deficit in FY26. "We had good non-tax revenue growth. Overall revenue growth has been on track. The festival season will continue till the end of the year. We are confident that the fiscal math will hold very well for the current financial year," he said.
'Q2 GDP to be close to 7%'
Based on high frequency indicators, Nageswaran hopes that the Q2 GDP number remains close to the 7 percent mark. “The impact of US tariffs may be muted in current year, but that will be compensated by GST rate reductions,” he said.
Effect of Trump tariffs on GDP:
Speaking about US President Donald Trump's tariffs, the CEA said that 0.4-0.5 percent reduction was expected from India's trend growth of 6.5 percent this year, and 1 percent reduction was likely next year. "But now due to GST reforms, the impact may be lower," he added.
Nageswaran said that the in medium to long term, FDI will not be impacted. GST, deregulation may act as catalyst for higher FDI. Even with additional tariffs, medium to long term investment attractiveness of India will not be impacted, he added.
Room for 10-year bond yield will likely go down as companies right now are concerned about second half borrowing and fiscal target, the CEA said. Second half borrowing will be unchanged, he added.
Also read: Reforms Reloaded Live Updates
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