September 30, 2025

Hold on tight! EY, the global consultancy giant, has just raised India’s GDP growth forecast for the financial year 2026 from 6.5% to a spicy 6.7%! The secret sauce? The brand-new GST 2.0 reforms. This big shake-up in taxes is expected to make goods cheaper, lighten household expenses, and fire up domestic demand like never before. According to EY’s Economy Watch September edition, “The upward revision reflects expectations of monetary easing and stronger domestic demand from GST 2.0 reforms, despite global headwinds weighing on exports.” DK Srivastava, EY India’s Chief Policy Advisor, said it best: “With GST 2.0 reforms boosting disposable incomes and domestic demand, and trade diversification efforts opening new opportunities, India is well positioned to sustain its growth momentum in FY26. Strategic investments in technology and targeted policy measures will be key to translating reforms into long-term economic gains.” So, what’s cooking in GST 2.0? The tax rates are now trimmed down into just two slabs—5% and 18%—plus a special 40% rate. The old tricky 12% and 28% slabs are out the door! This means prices could drop in super important sectors like textiles, consumer electronics, automobiles, healthcare, and food products. Great news for your wallet! Agriculture-linked businesses such as fertilizers, farm machines, and renewable energy will also find their costs shrinking. Cutting expenses means families can spend more, giving a big boost to demand. This might squeeze government tax income a little at first, but the bigger picture promises stronger economic health. Warning signs? EY does flag some risks. Tariff uncertainties and supply chain hiccups could rain on India’s export parade. India still leans heavily on the US and China for trade, so diversifying trade partners is a hot priority. Policymakers aim to hit a whopping US$500 billion bilateral trade with the US by 2030, splitting exports and imports evenly. To reach this goal, exports in services and imports like crude oil, natural gas, and defense gear have to grow nearly 20% every year. Investing in AI and new tech will be vital to ramp up service exports, EY adds. Despite the clouds on the global horizon, the combo of GST-led domestic demand boosts, monetary easing plans, and fresh trade opportunities keeps India’s economic engine humming at a healthy speed. The future is bright but balanced on a knife’s edge. Will reforms roar louder than global challenges? If yes, FY26 could be a blockbuster year for the Indian economy!

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Tags: India gdp forecast, Gst 2.0 reforms, Economic growth, Domestic demand, Trade diversification, Ey report,