India’s recent Goods and Services Tax (GST) rate cuts offer a welcome near-term cushion for the country’s economy, says economic expert Suvodeep Rakshit. However, the broader growth outlook remains delicately balanced due to tariff uncertainties and ongoing global risks that continue to cast a shadow over the medium term.

The GST reductions aim to provide immediate relief by lowering the tax burden on consumers and businesses alike, which in turn can stimulate consumption and bolster demand. This strategic move is expected to partially offset the impact of steep tariffs, such as the 50% duties imposed on certain US imports, which pose a significant threat to Indian exporters and overall trade dynamics.

Rakshit highlights that the GST cuts could potentially support India’s gross domestic product (GDP) growth by approximately 0.3 to 0.5 percent. This uplift stems from increased consumption driven by reduced taxes, income tax relief, and the usual festive season demand, which collectively work to enhance economic activity despite external pressures.

Inflation is also poised to ease, with predictions indicating rates could moderate to between 4 and 4.5 percent. This alleviation of price pressures is likely to provide some breathing space for consumers, encouraging spending and investment. Meanwhile, the Reserve Bank of India (RBI) remains watchful and could consider rate cuts if growth signals weaken, especially if GDP growth slips below the 6.5 percent mark.

Yet, despite these positive elements, India’s economic path forward is far from certain. Trade negotiations and policy responses will play critical roles in shaping near-term outcomes. Global economic volatility, including geopolitical tensions and supply chain disruptions, compounds the uncertainty. This precarious balance requires policymakers to remain agile and ready to implement measures that can sustain growth momentum.

Investors and market participants are closely monitoring these factors, alongside sector-specific developments, leading to notable volatility in financial markets. Mixed performances across various sectors reflect the cautious optimism tempered by global and domestic challenges.

In summary, while the GST cuts offer a timely boost and act as a buffer against tariff shocks, the interplay of tariff uncertainties and global risk factors keeps India’s economic growth forecast delicately poised. Staying adaptable and responsive will be key for India to navigate these choppy waters and sustain its growth trajectory in the coming months.