GST: Modi\s tax cuts will give India a festive spending boost

Information about the tax changes has still not trickled down to small shopkeepers

At a net level though, the impact of the GST cuts is expected to be largely positive.

According to ratings agency Crisil, lower taxes will benefit a third of an average consumer‘s monthly expenditure basket and improve the middle class’s purchasing power.

The extent of the impact will depend on the degree to which producers pass the rate cuts to consumers, Crisil said in a report, adding that the impact will play out over this and the next financial year.

The cuts, of course, come at a cost.

The government predicts they could lead to a revenue loss of around $5.4bn this year. But independent experts and rating agencies like Moodys expect the figure to be higher, with the strain on the exchequer even more pronounced in the coming years.

These losses add to a bleak macro picture: federal tax revenues have barely grown in the first four months, compared with a 20% jump last year, while spending is already up more than 20%.

With Delhi intent on keeping its fiscal deficit - the gap between revenue and expenditure - in check, the Modi government may have to hit the brakes on the big-ticket road and port spending that has driven Indias growth over the past five years.