Narendra Modi, India’s prime minister, throughout the nation’s Independence Day ceremony at Pink Fort in New Delhi, India, on Friday, Aug. 15, 2025.
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Indian markets rallied on Monday as Prime Minister Narendra Modi’s just lately revealed tax cuts prolonged a present to a home financial system that also faces the enamel of U.S. tariffs.
The Nifty 50 index superior 1%, with the BSE Sensex including 0.84%. In currencies, the U.S. greenback surrendered 0.18% towards the rupee.
In an in depth Independence Day speech on Friday, Prime Minister Narendra Modi made a concerted push for self-reliance and proposed a spate of financial reforms. New Delhi now plans a two-rate construction of 5% and 18% underneath wide-spanning modifications to the products and companies tax (GST) regime, and plans to abolish the earlier 12% and 28% levies imposed on some objects, Reuters cited a authorities official as saying on Friday. The information was additionally reported by local media.
“The reforms purpose to simplify compliance, decrease tax charges, and modernise the GST framework to make it extra growth-oriented. Trade executives count on measures reminiscent of rationalising charges into two slabs, easing the tax burden on micro, small and medium enterprises (MSMEs), slicing levies on important items, and utilizing technology-driven processes like pre-filled returns and quicker refunds to encourage funding,” the India Model Fairness Basis stated, including that manufacturing, logistics, housing and client items may stand to achieve.
India’s autos trade may additionally emerge as one of many beneficiaries of the brand new tax insurance policies after a sluggish stretch in latest months. Gross sales of India’s passenger autos, which embody vehicles, added 4.2% % within the 2024 calendar yr, the Society of Indian Vehicle Producers said in January – the slowest progress tempo in 4 years, according to Reuters.
Auto sector shares noticed will increase throughout the Monday session, as Maruti Suzuki India including 8.75%, whereas Hyundai Motor India rose by 8.15%.
“I am actually optimistic concerning the announcement, and the autos sector being a relative laggard in latest quarters, so not stunning to see that sector bounce again fairly strongly,” James Thom, senior funding director on the Asian equities workforce at Aberdeen, informed CNBC’s “Inside India on Monday.”
Modi’s tax overhaul may shore up India’s financial system, which the Reserve Financial institution of India sees rising 6.5% within the 2025-2026 fiscal yr, at a time of deep geopolitical uncertainty stoked by Washington’s sweeping so-called “reciprocal tariffs.” New Delhi specifically has fallen within the crosshairs of U.S. President Donald Trump’s administration over its ongoing purchases of Russian crude, with Washington imposing an additional 25% levy on Indian imports — bringing complete duties to 50% — on account of take impact on the finish of this month.
“India is a home consumption story. Exports is a comparatively small contributor. So this [tax overhaul] may greater than offset that impression of tariffs,” Aberdeen’s Thom stated.
“From a elementary standpoint, completely, I feel the modifications to the GST regime will likely be supportive near-term for consumption because it comes by means of later within the yr. And consumption has been weak in India for fairly a while now, so it is a actual form of enhance to the financial system, in the event you like, given India’s financial system is so depending on home consumption.”
Home consumption is “one of the crucial compelling indicators traders are intently monitoring,” and the “largest driver of financial progress in India,” with a 61.4% GDP contribution within the 2024-25 fiscal yr, Deloitte said in an August report.
“Notably, city consumption and a shift in spending preferences towards luxurious items are rising as key pillars of this momentum,” it stated.
India Scores & Analysis in the meantime forecast India’s private final consumption rate within the fiscal yr to the top of March 2026 will increase by an annual 6.9%, outpacing a broader 6.3% GDP progress outlook over the interval, on the again of low actual wage will increase, declines in family financial savings and a lift to private loans.
“A pointy decline in inflation has improved the prospects for steady consumption progress in FY26,” it added. India’s retail inflation has slowed from 4.31% in January to its lowest since 2017 at 1.55% in July.
