Structural issues, including policy and regulatory uncertainty and volatile external factors such as U.S. tariff tensions, are expected to keep private investment growth tepid and limit the overall boost from GST reform.

In the near term, the most noticeable impact of the revised GST will be in the durable goods sector, particularly automobiles, while non-durables and investment-facing sectors see smaller or more indirect benefits.

Under the revised GST regime—five and eighteen percent slabs (peak 18%), essentials largely exempt, and a 40% rate on sin and luxury goods—the effective tax rate remains broadly similar, with pass-through to consumers varying by product.

Demand-driven growth hinges on how widely and strongly consumption spillovers occur; higher demand could prompt firms to raise capacity, but policy uncertainty can deter new investment.

Persistent problems—poor infrastructure, governance weaknesses, policy uncertainty, and declining national savings—limit domestic investment and FDI despite GST reforms, according to Makoto Tsuchiya.

FDI remains highly sensitive to policy uncertainty, and constrained domestic savings continue to weigh on financing, dampening long-run growth prospects.

Oxford Economics warns that rate cuts alone cannot sustainably lift long-term growth due to deep-seated structural issues in the economy.

While GST cuts may provide momentum, Tsuchiya says a broader set of structural reforms is needed for sustained growth, and pass-through effectiveness will differ across goods and sectors.