Lower taxes spur buying, but jobs and incomes will have to grow

The Indian economy is going through a challenging phase. On the external front, it has been pushed into a corner with one of the highest reciprocal tariffs imposed by the US. The government, on its part, has been trying to push up domestic demand through lower income tax and GST rates. There are other supporting factors, too, like benign inflation and a good monsoon, that are expected to keep overall domestic consumption healthy. The IMF has recently revised India’s GDP growth projection for 2025-26 upwards to 6.6 per cent (the earlier projection was 6.4 per cent), even as it downgraded the growth for 2026-27 to 6.2 per cent (earlier at 6.4 per cent). The critical question at this point is that once the festive demand tapers, will the economy be able to maintain the growth momentum in the