This means the initial cut can have a larger ripple effect, boosting overall economic activity and income levels.....

 Lower GST rates in India would increase real wages and incomes by lowering the prices of essential goods and services, which increases household savings and purchasing power, and by boosting overall economic demand and growth, leading to increased employment and higher earning potential. Experts estimate a significant boost to the economy, with potential reductions in inflation and a positive multiplier effect on GDP growth when GST cuts are passed on to consumers.

How it increases real wages and incomes:

Reduced Prices:

Lower GST rates directly translate to lower prices for goods and services, especially for daily necessities. This increases the purchasing power of households, meaning they can buy more with the same income, effectively increasing their real income.

Higher Disposable Income:

With lower costs for essentials, households have more money left over for savings and other spending, further increasing their real wealth.

Increased Demand and Economic Activity:

Lower prices stimulate demand for goods and services, creating a virtuous cycle. This leads to increased production, which in turn requires more investment and can create new employment opportunities.

Higher Multiplier Effect:

Studies show that a reduction in GST rates has a higher multiplier effect on the economy than direct tax cuts, as it impacts a broad range of goods and services. This means the initial cut can have a larger ripple effect, boosting overall economic activity and income levels.

How much it could increase incomes:

Significant Inflation Reduction:

Experts estimate that the GST 2.0 reforms could reduce inflation by up to 1.1 percentage points by lowering the cost of essential goods.

Boost to GDP Growth:

A report by Ambit Capital suggests that if GST rate reductions are passed on to consumers, it could add 20-50 basis points to India's GDP growth.

Increased Employment:

With greater demand and increased investment in businesses, more job opportunities are expected to be created, raising incomes for the workforce.

Stronger Rural Wages:

Low food inflation and stable economic trends are expected to materially strengthen real wages, especially in rural India.

In summary, lower GST rates create a favorable economic environment that directly benefits consumers by making goods more affordable and indirectly boosts incomes by fostering economic growth and employment opportunities.