At the outset, it is important to remember that such a downward revision of the rates could be possible because the GST system has yielded dividends and the GST collections have proved to be buoyant more than expectations.

Underlying these developments is also the comfortable state of the Indian economy which is merely singing along with reasonably high rates of growth, in the face of formidable obstacles.

Never to be grudged, that the government and ruling party are seeking to project its people-friendly image through this action. But this present-day harvest of good fortune was a result of a long drawn-out struggle by many policy-makers, economists and bureaucrats over years.

In his context, one cannot but mention the name of Dr Vijay Kelkar, who had first prepared a rough blueprint for a nationwide uniform tax on goods and services in an integrated manner. Dr Kelkar was the finance secretary in union finance ministry and had a distinguished career as an economic administrator.

Thereafter, when the complex task of implementing such a difficult restructuring of a major segment of indirect taxes was taken up, one state finance minister who cannot be ignored for his indefatigable slogging behind the scenes was Dr Ashim Dasgupta. A highly trained economist, who had taught at the Calcutta University after his return from United States, Dr Dasgupta had become a compendium on this kind of taxation.

The idea of a uniform goods tax all over the country was accepted without much of opposition and it was straightened out. But the approach to a services taxation was tricky — the biggest was which services were to be taxed. Initially, the services taxation covered only a handful of services, which was gradually extended over the entire gamut of services —including even “tentwalas.”

At length, the new BJP government under Narendra Modi had come into office when the system for implementation of the new GST system had been fully worked out. All it needed was the political commitment at the federal level and in the states to give the final approval. A most investing irony was that when Narendra Modi was Gujarat chief minister, he had opposed the idea politically.

As political wheels of fortune changed, Narendra Modi had come to the prime ministerial berth in the centre and his government had spearheaded its implementation.

As always, the launch of the GST system was confusing and full of glitches. The entire system needed a fool-proof IT backbone and the initial months and years the functioning of the GST system had been full of glitches. Fortunately, as these were smoothened over, the GST system started yielding results.

When these changes are kicking in as a part of GST.2 , fortunately these have coincided with the biggest period of national festive season — maybe, it was timed that way. The prime minster was announcing how the reset GST regime should help bring some more cheers to the ordinary people and leave more money in the hands of the people rather than with the government.

It was showing how the BJP government was acting in the interest of the people and leaving benefits with them. The same government had admittedly given a bonanza to the public by giving a hefty exemption limit to personal income tax level in 2025-26 budget,

Together, these two concessions should leave no less than Rs2.50 lakh crores in the hands of the people and the bonanza should empower them to spend more this festive season. This is well-known economic strategy. It has been tried by others before.

US president Ronald Reagan had a go at it. He had announced large scale tax cuts and hoped the money at the hands of the people at large to give a upward push to overall demand and result in a multiplier effect on US economy. It had worked for creating a virtuous cycle of growth of demand and production and investment.

In the current scenario of upheaval in the global economy, such a domestic push is in order. Faced with the tariff walls in the USA, a good part of Indian exports are lying in country rather than moving towards the markets for which these have been manufactured. These must sell and if there is buoyant domestic demand the manufacturers would not be saddled with excess inventories.

Hence, the prime minister was exhorting people to spend and enjoy their festivities and in the course of that the economy will get a booster dose of demand. Surely, coming at this point of time any downward adjustment in prices, as a result of the fine tuning of the GST rate cuts, should get enthusiastic responses from the buyers.

Take for instance the cut in the on road prices of motor vehicles. The adjustments have worked out to some hefty downward revision in car and two wheeler prices. No wonder that these readjustments would mean more sales for the automobile makers.

In case of items of low individual value, like biscuit packs to drugs, the downward revisions would mean some spurt in demand and uptake in overall sales. Only one festive season spurt should not make much of a difference in the long term. The rise in demand must have some more solid basis and it must be that demand should settle at a higher plateau.

Economics is harder rock than only festive season sales and jolly-good feelings. For these incentives to really bring about a longer term, the rise in demand has to be sustained over long period. This is a tougher job than one-time cuts in rates.

The hopeful sign is that the Indian economy is driven mainly by its internal consumption, and it is not overtly dependent on exports. Hence, in the current situation, a push to domestic consumption assuming a longer term trend, should act as a engine of growth.

Given the internal steam of the Indian economy, it should hopefully provided adequate prime push to launch it on a higher growth trajectory. The issue is that the government should not take any steps which can inhibit this natural process of growth of the economy. (IPA Service)