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Legendary Japanese broking firm Nomura has retained India’s economic growth estimate for FY 26 to 6.2 percent and retail inflation rate at 2.7 percent. Outlook has been released by Nomura at a time when the Government of India has announced major reforms in the Goods and Services Tax (GST), which can increase consumption in the economy on a large scale.

At present, GST has four slabs (5 percent, 12 percent, 18 percent and 28 percent). According to reports, the central government proposes that their number should be reduced to two and only 5 percent and 18 percent slabs should be kept. Also, a tax of 40 percent should be imposed on luxury and sin goods like tobacco and cigarettes.

Analysts believe that policy makers will maintain the income coming from them by keeping high revenue generating goods and services in high tax slabs.

Nomura said that the real drivers of income and employment consumption remain. Tax reforms, which provide more costable income to families, can promote savings, while consumer can turn into demand stages.

Brokerage hopes the initial recession in shopping as families are waiting for tax rates, and then there will be an increase in demand in the festive season in October-November.

Nomura said that GST tax improvement on inflation front can be largely unfaply. In CPI basket, about 22 percent of the items fall under 12 percent slab, while 5 percent costs 28 percent tax.

However, Nomura has warned that prices may not fall immediately, cited the 2017 experience, where companies had increased the mark-up before the change in GST and only gave one part of the tax deduction to consumers, leading to the profit margin.

The Group of Ministers (GOM) will meet this week to discuss this proposal to change the GST rates, after which the GST Council will meet in September. If a consensus is formed, the new structure may apply till Diwali.

Nomura said that from the fiscal point of view, the government’s largest indirect tax collection comes from goods and services less than 18 percent, which is unlikely to have much impact.