How GST Reform Could Help Curb Inflation In India: Expert Insights And Impacts

The Indian government has declared a major reform in GST, intended to reduce tax rates on most of the daily essentials to 5%. Experts are sparking discussions over the impact of the new tax regime on inflation. Reducing the tax burden on most of the businesses will reduce the cost price, thus favoring the demand. This will increase the liquidity in the market and will probably ease the inflation pressure. 

Prime Minister Narendra Modi announced the GST rate cut on August 15, 2025. It targets regular food related items like pulses, edible oils, packaged foods, and other commonly purchased grocery items.

With inflation putting a constant pressure on household budgets in one way or the other, this rate cut in GST could reduce monthly grocery expenses for millions of families.

Inflation is influenced by a range of different factors, including global commodity prices, disruptions in supply chain, and currency variations. However, experts believe that tackling GST is a tool of direct fiscal policy that brings down consumer costs. The objective of the government is to make food, household items, and other essentials more affordable to the households through GST rate cut.     

According to a recent report by the Reserve Bank of India (RBI), regulating inflation through tax relief can improve consumer purchasing power with more liquidity in the market. Lowering prices enable households to plan their finances in a better way. This will lead to enhance economic confidence. Experts caution that the GST rate cut alone cannot control inflation but its an important part of a broader strategy that includes supply chain developments and monetary policy procedures.

Moreover, if this new rate cut executed, it will contribute to a more balanced economic environment that support growth and development whereas protecting consumers from price volatility across segments. This approach aligns with the government’s objective to form a tax structure that nurtures ease of living and bring economic stability.

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