REFORM NET WIDER

The good news is that the much-expected simplification of the goods and services tax regime has arrived.

- SHANKKAR AIYAR Author of The Gated Republic, Aadhaar: A Biometric History of India's 12 Digit Revolution, and Accidental India ([e-mail])

You could argue that the urge was driven by political considerations.

The trail of alterations since 2017 often carries the scent of electoral economics, and one does remember the khakra tax saga. It could also be argued that the changes are much-needed measures propelled by the challenge posed by slowing demand amid Trumpian tariff tactics. Of course, the government says the GST reforms are neither about Bihar nor Trump, but the result of 18 months of meetings. That the Centre and states must take 18 months to do ‘good’ is a testament in its own class!

Be that as it may, the hope is that the GST rate cuts will trigger demand and propel growth. The thesis belongs to the ‘only time will tell’ category. The tax reliefs of Budget 2025 are yet to reveal the torque on consumption. As forecasters shift around the decimals of GDP growth, questions hang in the air. Will the cuts boost consumption? The loss of revenue to the government, estimated at ₹48,000 crore—effectively, money moved from the public to the private sector—is expected to stimulate an economy of ₹330 lakh crore.

Oftentimes, political intent is waylaid by the hurrahs emanating from the surround-sound amphitheatre. Hopefully, the cliché of missing the woods won’t play out. The GST recast presents an opportunity to leverage the mood and push for deeper reforms.

The challenge of 50 percent tariffs on India’s exports to the US is aggravated by the perennially pending structural reforms highlighted in this column earlier.