[Answered] Critically analyze how GST reforms can align fiscal policy with the aspirations of a young population, thereby acting as a tool for economic empowerment and inclusive growth in India.

Introduction

With nearly 65% of India’s population below 35 (UNFPA, 2023), fiscal instruments like GST reforms become pivotal in aligning tax policy with youth aspirations, ensuring empowerment, affordability, entrepreneurship and inclusive national growth.

GST Reforms & Youth Aspirations – A Critical Analysis

1. Consumption-Led Growth & Household Empowerment: Private consumption forms ~60% of India’s GDP (World Bank, 2023). GST 2.0’s rate simplifications and exemptions on essentials (insurance, healthcare, education) increase disposable income, boosting demand for aspirational goods, services, housing and digital products. Multiplier effect, increased consumption → investment → jobs → further consumption, reinforcing the virtuous cycle.
2. Financial Security & Risk Mitigation: Historically, India’s insurance penetration is just 4.2% of GDP (IRDAI, 2022). Exemptions on life and health premiums encourage financial planning, strengthening household resilience against shocks. Reduces the “out-of-pocket expenditure” (currently 48% of health spending, WHO), securing long-term economic productivity of young families.
3. Entrepreneurship & MSME Formalization: MSMEs employ ~110 million people and contribute ~30% to GDP (MSME Annual Report, 2022). GST 2.0 simplifies compliance, reduces tax burden and expands formalization, improving access to credit, supply chain participation, and digital footprints. Young entrepreneurs benefit through lower entry barriers and transparent taxation, boosting Ease of Doing Business.
4. Employment Generation & Start-up Ecosystem: India has the world’s 3rd largest start-up ecosystem (Economic Survey 2023). GST reforms align with youth-driven digital entrepreneurship by reducing compliance frictions and encouraging innovation-led growth. Example: E-invoicing system under GST fosters transparency and trust in B2B transactions.
5. Predictability & Trust in Governance: A simplified two-tier GST structure ensures stability and policy predictability. Young professionals can plan finances better, mitigating uncertainty in income-expenditure cycles. Transparency strengthens “tax morale” (OECD concept), building confidence among taxpayers.

Critical Perspectives / Challenges

1. Regressive concerns: GST is an indirect tax—risk of disproportionately impacting lower-income youth despite exemptions.
2. Revenue federalism issues: States worry about reduced revenues from rate cuts, potentially affecting social expenditure (education, skill development critical for youth).
3. Complexity persists: Despite reforms, multiple slabs and frequent revisions create compliance burdens.
4. Digital Divide: Small youth-led businesses in rural/semi-urban India face challenges in digital GST filings.

Way Forward

1. Youth-Centric Tax Policy: Broaden exemptions on education loans, skill-training services, and affordable housing.
2. Equity through Direct-Indirect Tax Balance: Increase direct tax base alongside GST rationalization.
3. Tech-Driven Compliance: Use AI/ML for smoother compliance to support start-ups and gig workers.
4. Center-State Fiscal Harmony: Revise GST Compensation Mechanism to address state concerns.
5. Inclusivity Lens: Target GST reliefs towards marginalised youth, women entrepreneurs, and rural MSMEs for equitable growth.

Conclusion
 “As Amartya Sen notes in Development as Freedom, true empowerment expands choices. GST reforms, if youth-aligned, can translate fiscal policy into a catalyst for inclusive, sustainable economic empowerment.”