GST rate cuts done, but market guru Nilesh Shah has a 4-5 times bigger worry than Modi's 'diwali gift'

Market veteran and Kotak Mutual Fund MD Nilesh Shah on Thursday welcomed the government’s move to simplify GST slabs but cautioned that a bigger challenge lies in the way household savings are being diverted. In an X post, Shah said, “Savings misallocation happening through F & O speculation and double your money ponzi schemes making Indians quick money addicts costs more than four-five times the GST gift.”

GST reform called fiscally sustainable

The comment came a day after the GST Council approved a two-rate structure of 5 per cent and 18 per cent, replacing the earlier four slabs. A special 40 per cent slab was introduced for high-end cars, tobacco and cigarettes. The overhaul, effective September 22, will lower taxes on a wide range of items from consumer goods to insurance premiums and vehicles.

Shah termed the reform as “ek teer kai nishaan,” noting that it lowers inflation, improves ease of doing business, boosts consumption, and remains fiscally manageable. “The Diwali gift of ~ Rs 48000 crore is fiscally manageable at ~ 7 bps,” he said.

Larger concern on savings behaviour

While welcoming the move, Shah underlined that leakages in the GST system must be addressed and processes should continuously improve. More importantly, he flagged a structural concern: the growing diversion of savings into speculative trades and schemes that promise unrealistic returns.

By his assessment, such misallocation inflicts a cost on the economy many times higher than the revenue impact of the GST relief package.

The GST Council’s decision comes as India seeks to cushion the economy from the impact of steep US tariffs on exports by encouraging domestic demand. Economists project that the rate rationalisation could add up to 0.5 percentage points to economic growth by the second year of implementation.

The government estimates the fiscal cost of the changes at Rs 48,000 crore, a level officials describe as sustainable.