Current Affairs - Economy

The Centre has proposed a Two-Slab GST structure as part of its next-generation tax reform. This system introduces two main slabs—5% and 18%—along with a 40% levy on sin goods like tobacco and pan masala. The 5% slab will include daily-use and common goods, while the 18% slab will cover aspirational and white goods, such as refrigerators and televisions, that currently fall under the 28% category. Essential food items remain exempt, ensuring relief for households. The overhaul is aimed at simplifying the indirect tax system, resolving disputes, correcting inverted duty structures, reducing compliance burdens, and boosting overall consumption and GDP growth.

India’s merchandise exports in July 2025 registered a 7.3% growth, reaching $37.24 billion. This rise was driven by strong performances in sectors such as electronics, pharmaceuticals, engineering goods, chemicals, and gems & jewellery. Notably, electronic goods exports rose sharply by 34%, highlighting India’s increasing role in global high-tech supply chains, aided by Production Linked Incentive (PLI) schemes. While exports rose, imports also increased by 8.6% to $64.59 billion, pushing the trade deficit to an eight-month high of $27.35 billion. Despite this imbalance, the export growth indicates resilience in India’s trade sector amid volatile global market conditions.

Karnataka witnessed a massive spike in GST evasion during FY25, with cases surging to ₹39,577 crore across 1,254 instances, alongside nine arrests. This represents a fivefold jump compared to the previous year’s evasion figure of ₹7,202 crore. According to Finance Minister Nirmala Sitharaman’s report to the Lok Sabha, enhanced enforcement, improved analytics, and better data-sharing mechanisms contributed to this rise in detection. Voluntary tax payments amounted to ₹1,623 crore, reflecting partial compliance. Importantly, the government clarified that central GST authorities had not issued notices solely based on UPI transactions, addressing concerns raised by small traders in Bengaluru.

In July 2025, India recorded a significant drop in retail inflation, which fell to 1.55%. This marked the lowest level in eight years, with the last comparable figure seen in June 2017. The fall from 2.1% in June to 1.55% in July reflects easing price pressures across both rural and urban areas. Rural inflation stood at 1.18%, while urban inflation was 2.05%. Additionally, food prices experienced deflation, with the all-India Consumer Food Price Index falling to -1.76%, its lowest since January 2019. Such a sharp decline suggests improving supply-side conditions and stabilization in food prices.

Goldman Sachs has reduced its projection for India’s real GDP growth in 2026 to 6.4%, marking a 0.2 percentage point decline from the previous year’s estimate. This downward revision is attributed to escalating US–India trade tensions, specifically the 25% tariff imposed by the United States, as well as broader policy uncertainty affecting investor confidence and business planning. While the firm acknowledges that some tariffs might be renegotiated over time, the unpredictability surrounding trade policies remains a significant risk factor. This cautious stance reflects concerns over sustaining growth momentum amid geopolitical and macroeconomic challenges.