Diwali Of Renewal: How GST 2.0 And RBI Reforms Are Powering India’s New Economic Momentum

The story began with a flicker, a new appliance added to an online cart, a rooftop solar inquiry, and by the festival season, that flicker had grown into a flame. Retailers across India reported significant increases in appliance sales, with customers purchasing items they had postponed for months. Confidence in the economy seems to be returning, reflected in bustling stores filled with televisions and washing machines.

In Coimbatore, Dimexon, a diamond manufacturer that transitioned 75% of its operations to solar energy, witnessed renewed interest from suppliers and partners, encouraged by lower taxation on renewable energy equipment. Throughout India, such examples are becoming more common, revealing how recent policy reforms are actively shaping the country’s economic mood.

The twin policy shifts of this year — the streamlining of the Goods and Services Tax (GST) regime on September 22 and the Reserve Bank of India’s far-reaching financial-sector reforms on October 1 — are beginning to redefine the country’s growth trajectory. Together, they reflect one of the most ambitious reform alignments in recent years, uniting fiscal and monetary measures towards efficiency, trust, and sustainable expansion.

The new GST structure replaced the earlier four-rate system with two principal slabs of 5% and 18%, while retaining a 40% rate for luxury and sin goods. The removal of the intermediate 12% and 28% brackets simplified compliance and resolved classification disputes that had long plagued small businesses.

Essential and commonly used items, from packaged food and soaps to bicycles, home appliances, and electronics, now attract the lower rate, effectively reducing prices for consumers and improving household purchasing power.

The results were immediate. According to official data, gross GST collections stood at ₹1.89 lakh crore in September 2025, marking a 9.1% year-on-year increase. The trend is likely to maintain similar momentum, supported by festive demand and improved compliance under the simplified GST structure. The number of registered taxpayers crossed 1.58 crore, a rise of 14% over last year, signalling continued formalisation.

For the logistics industry, long troubled by layered taxation, the impact has been equally visible. Harsh Vardhan Gupta, Co-Founder and CEO of MatchLog Solutions, noted, “The GST relief on freight and carriage services is a decisive boost for the logistics sector. Bringing down the tax rates will ease operating costs for transporters, exporters, and fleet operators, making cargo movement more efficient across the country.”

In Morbi, Gujarat’s industrial cluster known for ceramics and textiles, small exporters have reported faster input tax refunds and leaner working capital cycles, allowing them to compete more aggressively in export markets.

Consumer-facing sectors have been the biggest beneficiaries this festive season. Passenger vehicle sales surged 35% during Navratri, marking one of the best retail seasons on record. Mercedes-Benz India recorded its highest-ever September sales, growing 36% year-on-year, while two-wheeler sales in Gujarat jumped 38%. Sanjay Nayar, President of Assocham, described the development as “a timely stimulus that will aid consumption and boost private capital expenditure.”

Internationally, India’s dual-rate model now aligns more closely with efficient global systems. Countries such as Singapore apply a single 8% GST and Malaysia a flat 6%, but India’s two-tier structure represents a pragmatic balance between affordability, revenue stability, and administrative ease.

The Reserve Bank of India’s policy moves complemented this fiscal shift with measures designed to spur lending and investment. Maintaining the repo rate at 5.5% ensured monetary stability, while reduced risk weights on infrastructure loans encouraged long-term project financing.

By resuming licences for Urban Cooperative Banks after nearly two decades, the RBI has also strengthened financial inclusion, especially in rural and semi-urban India. The inclusion of cooperatives under the Integrated Ombudsman Scheme further enhances transparency and depositor protection. Together, these measures are helping rebuild trust in the financial ecosystem and extend credit to small borrowers and microenterprises that form India’s economic backbone.

Digital transformation continues to be the silent force behind these reforms. The integration of the GST Network with banking and income-tax systems now enables pre-filled returns, automated reconciliation, and faster refunds, reducing compliance time by up to 40% for MSMEs.

Meanwhile, the Unified Payments Interface (UPI) has emerged as the payment rail for a new economy, handling over 14 billion monthly transactions, up 27% year-on-year. The RBI’s decision to raise the transaction limit to ₹5 lakh has further eased high-value business payments.

The convergence of e-invoicing, UPI, and biometric authentication has created a transparent, efficient, and inclusive financial infrastructure that supports both compliance and convenience.

With inflation moderating at around 2.1% and MSME credit expanding by 13%, the direction of change appears positive, especially as bank lending more broadly grows by about 11%. The government expects the short-term notional revenue loss of around ₹1.1 trillion from rate rationalisation to be offset by stronger compliance and rising demand.

Market sentiment mirrors this optimism; the Sensex has crossed 78,000 for the first time, reflecting growing investor confidence.

The way forward will depend on maintaining this momentum. States must continue capacity building for GST administration and deeper integration with the GSTN. Banks must balance new lending flexibility with prudence. Cooperative banks must modernise governance in step with digitisation.

Above all, policymakers must keep reforms people-centred, ensuring that simplicity and transparency remain their guiding principles. With this, India will see a more confident, formal, and forward-looking economy — one that steadily advances towards the vision of Viksit Bharat 2047.