December 7, 2019

Will new/ increased GST rates lead to "stagflation"?

Stagflation = stagnating economy + persistent high unemployment and inflation

Stagnating economy = declining GDP, IIP, demand, reducing consumer spending etc

This is a nightmare because measures designed to solve one problem usually lead to another bigger problem.

Now GST rates are being increased because of falling tax revenues (drop in demand). Increase in GST rates will be lead to higher inflation and even more reduced demand thus creating a vicious circle.


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