'GST 2.0 Alone Can't Drive Consumption, We Also Need...': Amitabh Kant On India's Response To US Tariffs

GST 2.0: India's economy is all set to receive a massive consumption boost in the festive season with the landmark 'GST Reform 2.0', that has cut the tax slabs from four to two, aiming to push demand-led growth. The move, coupled with the recent income tax cuts, is significant for the middle-class, amid the US tariff pressure, that weighs on India's economic growth.

The Goods and Services Tax (GST) Council, chaired by finance minister Nirmala Sitharaman, approved limiting slabs to 5 and 18%, effective from Sept. 22, the first day of Navaratri. A new 40% tax rate will be applicable on luxury and sin items. The GST tax rate cuts aim to put more money in the hands of the common man, to drive the country's purchasing power and simplify the tax regime, especially for MSMEs and entrepreneurs.

In the current economic scenario, Amitabh Kant, India's G20 Sherpa (till June 2025), and the former chief executive officer (CEO) of Niti Aayog, spoke to NDTV in an exclusive interview, termed the GST 2.0 as a 'landmark move' for the economy, which will be a major thrust to consumption.

In the backdrop of US tariff pressure, Kant said that India's response to US should be 'action and delivery' and that internal reforms are critical to do the same. The top official also believes that GST 2.0 alone cannot fulfil India's long-term consumption story, and the country needs 'good quality job creation'.

According to Amitabh Kant, India's consumption was subdued for the past few years as a consequence of COVID-19. "India needed to push its consumption story in a big way and needed to simplify the tax regime," he said, adding, "The consumption push will drive greater demand, which will result in greater capacity utilization, which will push greater investments for the economy."

GST 2.0 is said to impact several sectors, however, Kant believes that it should be accompanies with several other reforms, such as ease-of-doing business. Among its major benefits, GST 2.0 has eliminated the inverted duty structure on man-made fabrics, which was a major challenge earlier.

"Raw materials were at a higher rate of duty than final products. GST reforms can lead to the creation of vast number of jobs in the textile sector," he said. According to Kant, nearly 80% of demand worldwide is in manmade sector, but India's focus was largely been on the cotton sector. "We were getting impacted in man-made segment due to inverted duty."

The simplification of the GST regime is a 'major step forward' for the economy, as per Kant. "The fact that we have replaced a vast number of taxes and cesses with one tax is a big reform. It is a great administrative move forward," he told NDTV's Aditya Raj Kaul, Senior Executive Editor, Geopolitics, National Security & Strategic Affairs in the interaction.

In the context of 50% tariff imposed by the US, which will impact India's energy security and strategic autonomy, Kant believes that the government needs to push for a vast range of radical reforms, to counter the external headwinds.

"GST 2.0 is a big dynamic move in the context of tariff imposed by Trump", said Kant, adding, "It demonstrates a great political will to confront the challenges that the Indian economy faces amid US tariffs." According to him, major steps are needed to counter tariffs, so it is a 'huge opportunity for India to reform itself.'

"When one is confronted by a 50% tariff imposed by a country which accounts for 26% of the global GDP, one needs to take a vast number of measures and internal reforms are critical to that," he said.

Terming it as a 'perfect timing' in terms of the festive season, Kant emphasized that GST cuts will bring forward a consumer boom as lot of household items are now exempted. "It will push both India's consumption and manufacturing story," claimed the top official.

Discussing India's long-term growth story, Kant explained that the country need to accelerate economic growth, but considering the 2047 goal of becoming a developed economy, India needs to grow at a rate 8.5-9% year-on-year for three consecutive decades, which is a 'massive' challenge.

"To achieve that, major reforms need to be planned and GST 2.0 is a big move forward, but we also need to implement labor reforms, decrease interest rates, and counter challenges faced by the municipal governance, and many more," Kant said, adding, "Many reforms announced in Budget 2025 were very progressive which need to be implemented, so that we are able to accelerate the process of job creation in the manufacturing and urban sector."

Kant emphasized that India's long-term consumption story cannot only be through GST, it also needs creation of ''good quality jobs''. He went on to explain, "Good quality jobs will happen when we are able to give a thrust to manufacturing. That thrust will happen when we're able to reduce the cost of energy and logistics and ensure our entrepreneurs are able to become globally competent. All this will require constant reforms regularly."

The economy needs 'very progressive urbanisation' in this context, as per Kant. "Sectors like power, logistics, energy require reforms and a new scheme for deep tech will enable India to leapfrog in a big way," he said.

Coming to recent threats from US government officials over tariffs, the former Niti Aayog CEO said, "India should be cool, calm, and collected and not get provoked". "We should just use this as an opportunity to carry out the domestic reforms and accelerate the pace of growth. That will be a long term solution to all this. There's no need for us to respond," he added.

He further added, "Our response should be action and delivery, which is to accelerate the pace of India's economic growth." According to Kant, India should never compromise on its energy security and never get dictated by any country "on where we should buy our oil from", referring to Trump's tariff penalty over the country's continued Russian oil imports.

"The government has already made it clear," stressed Kant, adding that India should also never compromise on its strategic autonomy. "We should still try and strike a good deal with the US in our national interest. It is important for India to work with the US. India is doing its best to arrive at a good trade agreement with them," he explained.

In the backdrop of PM Modi's recent meeting with Chinese President Xi Jinping, Amitabh Kant believes that it will be very difficult for India to become a great manufacturing nation without a partnership with China. ''We need to partner with China with long-term strategic alliances. The US has been outsourcing its manufacturing to China for the last four decades," noted Kant.