GST 2.0: From Festive Boom to Sustained Growth — Can India Maintain the Momentum?

 

GST 2.0: From Festive Boom to Sustained Growth — Can India Maintain the Momentum?

In a recent press briefing, several Union Ministers announced that GST 2.0 has been a major success. Introduced just ahead of the festive season, this revamped tax structure—featuring only two simplified slabs—was positioned as a “bonus for the people,” designed to spur spending and accelerate economic growth.

And it worked.

The electronics sector recorded a 25% surge in sales during Navratri, while Maruti Suzuki sold 51,000 cars on Dhanteras alone—that’s roughly 35 cars a minute! Hyundai too reported a 25% rise in festive sales. With increased car sales came a ripple effect—boosting demand for accessories, furniture, and sweets—driving a broader surge across the economy.

So far, so good. But is that enough?

The Need to Move Beyond a Festive Surge

While India is projected to clock the highest growth rate globally at 6%, this still falls short of its own 8% target. Realistically, even 8% won’t be enough to keep India in the world’s top economic league. To truly thrive, India needs sustained double-digit growth for at least the next five years.

Let’s hope this momentum doesn’t fade after the festive season. For now, the government’s bold step to simplify GST appears to be paying off. But what happens if consumer demand slows? With many short-term policy levers already exhausted, the next phase must be transformative, not incremental.

India needs radical reforms that can propel the economy forward—not small, reactive steps.

Beyond GST 2.0: The Reforms India Now Needs

1. Factor Market Reforms: Land & Labour

• Labour Law Harmonization:
  Though Parliament passed four new labour codes in 2020, their implementation remains stalled. Simplified, uniform rules are crucial to give businesses flexibility while extending social security to the unorganised sector.

• Land Acquisition & Monetisation:
  Streamlining land laws and fast-tracking government land monetisation can cut project delays, attract investment, and unlock much-needed public revenue.

2. Financial & Banking Sector Reforms

• Public Sector Bank Consolidation:
  Further merging state-owned banks and aligning their incentives with commercial performance can make them more competitive and efficient.

• Access to Capital for MSMEs:
  Despite initiatives like MUDRA, MSMEs still struggle to access credit. India needs a stronger digital credit framework that links small enterprises to formal finance and global supply chains.

• Reviving Private Investment:
  Targeted credit guarantees and tax incentives must boost private investment in electronics, renewable energy, and pharmaceuticals—the sectors that will define India’s growth story.

3. Human Capital & Innovation

• Skill Development for Industry 4.0:
  Bridging the skill gap is vital. Education and vocational training must pivot toward AI, robotics, and digital technologies. Urban job programs should include rental housing and mobility incentives to enhance labour flexibility.

• R&D and Innovation Funding:
  The Deep Tech Fund of Funds is a positive start, but India must further strengthen the R&D ecosystem. Collaboration between industry and startups—as envisioned under Startup India—will drive innovation and job creation.

4. Infrastructure & Sustainability

• Accelerating Infrastructure Investment:
  Despite higher capex spending, India’s infrastructure gap remains wide. The National Monetisation Pipeline (NMP) must be executed more aggressively to finance new projects.

• Green Economy Transition:
  Expanding green bonds and circular economy initiatives can generate sustainable jobs and attract global ESG investments. Green technology adoption should be incentivized at scale.

• Integrated Supply Chains:
  Strengthening logistics through initiatives like BharatTradeNet and improved transport networks will boost India’s trade competitiveness and integrate MSMEs into global markets.

From Consumption to Sustained Investment-Led Growth

The tax cuts under GST 2.0 have successfully boosted consumption. The next step is to convert this short-term consumption surge into long-term investment growth—creating a virtuous cycle where higher demand drives productivity and innovation.

Achieving this requires:

• Building institutional capacity and political consensus for tough reforms.

• Empowering states to lead on land, labour, and investment reforms.

• Transparent communication to help citizens see the long-term benefits of structural change.

Key Takeaways

• India’s Real GDP is estimated to grow 7.8% in Q1 FY 2025–26, up from 6.5% a year ago.

• By 2030, India is projected to become the world’s third-largest economy, with a GDP of $7.3 trillion.

• 17 crore jobs have been created in the past decade, reflecting a strong employment push.

• Next-generation reforms, including the new GST framework and PM Viksit Bharat Rozgar Yojana, are driving India’s march toward Viksit Bharat 2047.

Conclusion: From Short Spurts to Long Strides

The success of GST 2.0 shows India’s capacity for bold, people-centric reform. But to secure its place among the world’s top economies, the next chapter must focus on deep, structural transformation—in policy, production, and people.

India’s growth story can’t rest on festive highs. It must be built on institutional strength, innovation, and inclusive prosperity—a growth model that endures well beyond the celebration season.

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