For 70 years after independence, India was one nation but never truly one market. A bewildering web of state-level taxes and barriers made the simple act of moving goods across state borders both time-consuming and costly. It was often cheaper to ship iron ore to China, get it value-added there, and then bring the finished product back to India, rather than attempt the same exercise domestically.
That was a self-sabotaging policy structure that somehow persisted for decades. The solution—an integrated Goods and Services Tax (GST)—was widely discussed by experts and successive governments, but it eluded the nation. Finally, in July 2017, thanks to enormous political will and painstaking negotiations across party lines and with the states, GST became a reality.
As with any paradigm-shifting reform, the beginning was not without teething problems. Businesses had to adapt to the new regime, technology platforms had hiccups, and sceptics predicted failure. But the system found its rhythm. Multiple indirect taxes collapsed into just four slabs, cascading tax inefficiencies were drastically reduced, and interstate movement of goods sped up. The doomsayers were proven wrong.
It is no coincidence that in the years since GST was implemented, India has emerged as the fastest-growing large economy in the world. The reform did not just streamline taxation; it integrated the Indian marketplace in a way that unlocked productivity and competitiveness.
Now, eight years later, the launch of GST 2.0 marks the next big leap. It rationalises the slabs from four to three, while bringing most items under the 5 per cent or lower tax bracket. This is simplification on a scale rarely attempted in any large economy, and it comes at precisely the right moment.
The original GST regime has taken root. Its robustness became a shield against any risk of revenue collapse. Indeed, collections have doubled over the last four years, rising to Rs22 lakh crore in 2024–25. Projections for this fiscal already stand at Rs24 lakh crore. For the Reserve Bank of India, this reform is a growth accelerant—its projections suggest GDP will cross the 7 per cent growth mark this year.
For ordinary Indians, the reform is already showing up in prices. Standard Chartered Bank estimates that inflation will drop by at least 60 basis points. Knitwear, automobiles, and dozens of other consumer products are already seeing price cuts, fuelling consumption-led growth.
The new GST technological backbone is impressive. AI-driven monitoring and blockchain-based audit trails are weeding out fake claims and tax fraud, while drastically improving the speed of refunds. For small and medium businesses, this is a big boon—reducing compliance drudgery while improving cash flow. For India’s economy, GST 2.0 is akin to the afterburners firing on a rocket that has already taken off. The base has been laid, the trajectory is set, and the thrust now ensures acceleration at a time when the world economy is struggling with trade wars, supply-chain disruptions, and protectionist tariffs.
Back in February this year, I had argued in this column that India’s unique economic structure—less dependent on exports and more powered by domestic consumption, compared to countries like China—was our hidden strength. It cushioned us from external shocks, and it gave us policy headroom for growth. The rollout of GST 2.0, coupled with the Modi government’s consistent push for Atmanirbhar Bharat, is both a response to immediate challenges and a long-term structural reset.
History will remember 2017 as the year India finally became one market. But it will mark 2025 as a major turning point towards becoming the world’s third largest economy.
Baijayant ‘Jay’ Panda is National Vice President of the BJP and is an MP in the Lok Sabha.