Nomura retained its growth and inflation forecast for the financial year 2026. The brokerage has pegged growth at 6.2% and consumer price-based inflation at 2.7%. In long-pending step, the Government of India is set to rationalise the GST rates. The four existing slabs of 5%, 12%, 18%, and 28% will be reduced to two slabs of 5% and 28%.
The centre has also proposed to introduce a 40% slab for sin and luxury goods. In theory, removing 12% and 18% tax slab would lead to a loss of 0.19% of the GDP growth. However, in practice, states will resist a change which will lead to revenue loss without a compensation.
Now, this hints at the fact that GST rates will be rationalised keeping high-revenue generating goods and services in the higher slab. Jobs and income prospects remain more fundamental drive of consumption. Higher disposable income due to tax reform may lead to more savings. Meanwhile, tariffs have weakened the export prospects, which is why Nomura is retaining its growth outlook.
