New Delhi, Sep 6 (NationPress) Following the implementation of the Goods and Services Tax (GST) reforms, banks are anticipating a surge in credit demand across retail, MSME, and agricultural sectors as income levels increase and business investments gain momentum.

Ajay Kumar Srivastava, Managing Director and CEO of Indian Overseas Bank, remarked that these reforms will have a profound impact on the economy, enhancing cash flows for both distributors and retailers, improving access to working capital for small enterprises, and increasing credit needs driven by escalating demand.

“In essence, this initiative serves as a catalyst for inclusive growth and economic transformation, aligning with India’s vision of Viksit Bharat,” stated Srivastava.

This initiative aims to simplify taxation, making it more transparent and easier to navigate.

“We anticipate these measures will lead to a projected growth in consumption of over 8-10 percent in the upcoming two quarters in rural markets, particularly benefiting farmers through reduced costs of agricultural products as GST has been lowered from 12 percent to 5 percent,” according to Srivastava.

Additionally, the price reductions on essential items like dairy products, household goods, and consumer electronics will alleviate financial pressure on consumers.

The decrease in GST on vehicles, electronics, and housing materials is expected to stimulate demand in these areas, while making insurance policies entirely tax-free will further promote financial inclusion.

Sanjay Agarwal, Senior Director at CareEdge Ratings, noted that lower GST rates lead to a reduction in the final prices of goods and services, enhancing consumer purchasing power and potentially boosting demand across various sectors.

The impact is particularly evident in the consumer durables sector. Reduced GST on automobiles, electronics, and appliances not only renders these products more affordable but also widens the market to include price-sensitive consumers who were previously excluded.

“We could witness an uptick in auto loans and personal loans for electronics purchases,” he added.

Outstanding housing loans, vehicle loans, credit cards, and consumer durables together account for approximately 16.7 percent, 3.5 percent, 1.6 percent, and 0.1 percent of banking credit, respectively.