Daijiworld Media Network- Washington

Washington, Aug 28: The much-awaited Goods and Services Tax (GST) reforms, expected to cut rates and boost private consumption, may help India soften the blow from fresh US tariffs, according to a report by BMI, a Fitch Solutions company.

Despite additional tariff pressures on certain industries, India’s GDP is projected to stay above 6 per cent, keeping the country among Asia’s fastest-growing emerging market economies through this decade.

BMI forecast India’s economic growth to gradually ease to just above 6 per cent by the decade’s end, slightly below the pre-pandemic average of 6.5 per cent, yet still strong enough to maintain its regional lead. Productivity is expected to rise around 5 per cent over the coming years, offering crucial momentum to overall growth.

The report noted that a steep 25-percentage point rise in US “reciprocal” tariffs could trim India’s GDP growth by 0.2 per cent in FY2025-26 and FY2026-27. Projections have accordingly been revised down to 5.8 per cent and 5.4 per cent for the two years.

However, the upcoming GST reform, which may rationalise the slabs into a simplified two-tier structure, is seen as a possible game-changer. “Depending on the specifics, GST reform could cancel out the drag on growth from tariffs,” BMI observed, while cautioning that final details are yet to be announced.

The move is likely to benefit automobiles, financial services, cement, and consumer staples by improving profitability and fuelling demand. A recent SBI Research study estimated that GST rationalisation, combined with recent income tax cuts, could lift private consumption by Rs 5.31 lakh crore — around 1.6 per cent of GDP.

Fitch Ratings, meanwhile, has reaffirmed India’s sovereign rating at ‘BBB’ with a stable outlook, adding that the impact of US tariffs on India’s overall growth will remain limited.