Quote on Inflation and GST 2.0 Reforms by Dr. Manoranjan Sharma, Chief Economist, Infomerics Valuation and Ratings Ltd
Below the Quote on Inflation and GST 2.0 Reforms by Dr. Manoranjan Sharma, Chief Economist, Infomerics Valuation and Ratings Ltd
Triad of plunging inflation, huge GST cuts and festive cheer boost consumption
“The CPI inflation rate in September 2025 came in yesterday at 1.54 % on a year on year (yoy) basis- the lowest in well over eight years. Together with the GST 2.0 reforms, which are estimated to provide an additional consumption boost of Rs. 1.98 lakh crore via lower indirect taxes and simplified slabs, which are likely to boost the disposable income of the households and provide an impetus to the consumption-driven growth story of India in this festival season. While this income relief to households, particularly poorer ones in terms of maintaining real incomes is the broader macro setting, the actual effect will vary across regions and sectors because of multiple income groups, expenditure mix, state, etc.
This inflation print also provides room for further monetary easing, thereby reducing borrowing costs and improving real income for borrowers or households with floating interest rates. However, core inflation may still remain sticky, wage growth may slow on weak demand and deflation or too low inflation can sometimes discourage production or investment if firms expect price declines. There are also issues of revenue loss to states, uneven pass-through, state budget pressures and inflation rebound. Constant vigil is needed on the evolving macro landscape.”
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