Impact of GST on inflation to be less than 20 bps, says Nomura

Goods and Services Tax or GST is a comprehensive indirect tax that was introduced in India on 1st July 2017. Since its implementation, there has been a lot of speculation about its impact on the Indian economy. One of the concerns raised by many was that GST would lead to inflation. However, according to a recent report by Nomura, the impact of GST on inflation is expected to be less than 20 basis points (bps).

The report by Nomura analyzes the inflationary impact of GST on the Indian economy. It suggests that the impact will be minimal and will not lead to a significant increase in prices. It is important to note that the report takes into account the impact of GST on different sectors of the economy.

Impact of GST on Different Sectors

According to the report, the impact of GST on different sectors will vary. Some sectors are expected to see an increase in prices, while others may see a decrease. The sectors that are expected to see an increase in prices include textiles, footwear, and fertilizers. On the other hand, sectors such as automobiles, consumer durables, and telecom are expected to see a reduction in prices.

The report also suggests that the impact of GST on the services sector will be minimal. This is because most services were already being taxed under the previous tax regime, and the GST rates for services have not seen a significant increase. However, the report does note that the impact of GST on the service sector will vary depending on the individual services.

Impact on Inflation

The report by Nomura suggests that the impact of GST on inflation will be less than 20 bps. This means that the overall impact of GST on prices will be minimal. The report also notes that the impact of GST on inflation will be temporary and is expected to subside once the initial teething problems are resolved.

The report also suggests that the government's decision to exempt certain goods and services from GST will help control inflation. The government has exempted basic necessities such as food, healthcare, and education from GST, which will help keep prices in check.

Conclusion

In conclusion, the impact of GST on inflation in India is expected to be less than 20 bps. The report by Nomura suggests that the impact of GST on different sectors of the economy will vary, and some sectors may see an increase in prices. However, the overall impact of GST on prices is expected to be minimal. The government's decision to exempt certain goods and services from GST will also help control inflation.