GST rate cuts, Income Tax relief, and subsidies to Entrepreneurs will help sustain growth, says CEA – But experts remain skeptical

V. Anantha Nageswaran, Chief Economic Advisor (CEA) to the Government of India, has expressed confidence that India's GDP will grow by 7% in the second half of the current financial year (FY). He noted that the 7.8% GDP growth recorded in the previous two quarters had already been anticipated.

- Kishore Kumar Biswas

According to Nageswaran, India's strong post-pandemic growth is not an anomaly but the outcome of several reform-oriented economic policies implemented over the past seven to eight years. He was speaking at a special session titled “India@3: The Road to Becoming the World's Third Largest Economy”, organized by the MCCI in Kolkata in the third week of September.

He explained that around 60% of India's economic growth comes from consumption, 21% from capital formation, and about 20% each from exports and imports. After the pandemic, urban demand initially drove consumption, while rural demand lagged. However, this trend has now reversed, with rural demand outpacing urban consumption growth.

Immediate factors behind high GDP growth

Nageswaran identified key factors likely to sustain growth in the coming quarters: income tax relief, incentive schemes for entrepreneurs, rationalization of GST rates, and low inflation.

The issue of GST rationalization generated considerable interest among the audience. When asked whether the impact of GST rate cuts would be short-lived or long-term, the CEA asserted that the effects would be lasting.