Narendra Modi, India’s prime minister, throughout the nation’s Independence Day ceremony at Crimson 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 lately revealed tax cuts prolonged a present to a home economic 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 economic reforms. New Delhi now plans a two-rate construction of 5% and 18% underneath wide-spanning adjustments to the products and providers 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 native media.
“The reforms goal to simplify compliance, decrease tax charges, and modernise the GST framework to make it extra growth-oriented. Business executives anticipate measures similar to rationalising charges into two slabs, easing the tax burden on micro, small and medium enterprises (MSMEs), chopping levies on important items, and utilizing technology-driven processes like pre-filled returns and sooner refunds to encourage funding,” the India Model Fairness Basis mentioned, 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 current months. Gross sales of India’s passenger automobiles, which embody vehicles, added 4.2% p.c within the 2024 calendar yr, the Society of Indian Vehicle Producers mentioned in January – the slowest progress tempo in 4 years, in line with 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 current quarters, so not shocking to see that sector bounce again fairly strongly,” James Thom, senior funding director on the Asian equities group at Aberdeen, instructed CNBC’s “Inside India on Monday.”
Modi’s tax overhaul may shore up India’s economic 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 particularly has fallen within the crosshairs of U.S. President Donald Trump’s administration over its ongoing purchases of Russian crude, with Washington imposing a further 25% levy on Indian imports — bringing whole 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 affect of tariffs,” Aberdeen’s Thom mentioned.
“From a basic standpoint, completely, I believe the adjustments to the GST regime shall be supportive near-term for consumption because it comes by later within the yr. And consumption has been weak in India for fairly a while now, so it is a actual kind of increase to the economic system, should you like, given India’s economic system is so depending on home consumption.”
Home consumption is “probably the most compelling indicators traders are carefully monitoring,” and the “largest driver of financial progress in India,” with a 61.4% GDP contribution within the 2024-25 fiscal yr, Deloitte mentioned 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 mentioned.
India Rankings & Analysis in the meantime forecast India’s non-public remaining consumption price within the fiscal yr to the top of March 2026 will develop 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.
