GST Reforms to Boost India’s Consumption and Demand: Morgan Stanley

Rapid Summary

• Morgan Stanley reports indicate an improved outlook for consumption and domestic demand in India due too GST reforms and other support measures such as personal income tax cuts, monetary policy easing, job growth, and rising real wages.
• Prime Minister Narendra Modi announced next-generation GST reforms during the Independence Day speech, set to roll out before Diwali benefiting consumers, small industries, and MSMEs.
• Finance Ministry proposes a simplified two-tier GST system focusing on structural reforms, rate rationalization, and ease of living.
• Proposed changes include eliminating 12% and 28% slabs in favor of just 5% and 18%. Major shifts would see:

– 99% of items from the 12% slab move to the new lower tier (5%),
– And about 90% from the higher tier (28%) shift downwards into the moderated category(18%).
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