GST 2.0 Reform to Push India’s FY26 Growth Towards 6.8%: CEA

India’s Chief Economic Adviser (CEA) V. Anantha Nageswaran said the country’s GDP growth in FY26 is likely to move towards the upper band of the projected 6.3%–6.8%, aided by the recently implemented GST 2.0 reform and tax concessions. He made these remarks at the Network18 Reforms Reloaded 2025 summit in New Delhi, highlighting how the reform package will play a pivotal role in boosting demand and sustaining growth momentum.

GST and Tax Relief to Drive Multiplier Effect

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Nageswaran described GST 2.0 as a “landmark reform” that will provide a significant push to domestic consumption. He said the combination of GST rate reductions and income tax relief announced in the Union Budget is expected to deliver a strong multiplier effect on the economy, with an overall impact exceeding ₹2.5 lakh crore. While global uncertainties may dilute some gains, the CEA expressed confidence that these measures would lift GDP growth numbers.

Revenue Stability for States

On concerns about potential revenue loss for states, Nageswaran noted that earlier GST rate cuts had not led to a decline in collections. Instead, states’ revenues have risen steadily, proving that lower rates can coexist with higher compliance and growth in collections.

Fiscal Position and Growth Indicators

Nageswaran projected the gross fiscal deficit at 4.4% of GDP for FY26, supported by strong non-tax revenue growth and consistent collections. He expressed optimism that the “festival season” demand cycle would strengthen overall economic activity. He also said high-frequency indicators suggest that Q2 GDP growth could hover close to 7%, reinforcing confidence in the economy’s near-term performance.

External Headwinds and U.S. Tariffs

Addressing global risks, the CEA acknowledged that tariffs imposed by U.S. President Donald Trump could trim India’s trend growth rate by 0.4–0.5 percentage points in the current year, with a 1% hit expected next year. However, he added that the GST reforms would offset part of this impact. In his view, foreign direct investment flows would remain resilient in the medium to long term, supported by deregulation measures and the structural strength of the Indian economy.

Bond Yield Outlook

Regarding the debt market, Nageswaran pointed out that if borrowing requirements don't alter in the second half of the fiscal year, 10-year bond yields might decrease, allaying worries about budgetary targets.

Conclusion

India’s economic outlook for FY26 appears encouraging, with domestic reforms such as GST 2.0 and tax relief measures providing a strong cushion against external headwinds. While tariffs and global uncertainties remain risks, the government’s fiscal discipline, growing revenues, and ongoing policy reforms position the economy to achieve growth closer to the 6.8% mark.