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 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% in opposition to the rupee.
In an intensive 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% beneath 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 native media.
“The reforms goal to simplify compliance, decrease tax charges, and modernise the GST framework to make it extra growth-oriented. Trade executives count on measures comparable to rationalising charges into two slabs, easing the tax burden on micro, small and medium enterprises (MSMEs), reducing 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 shopper items might stand to realize.
India’s autos trade might 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 12 months, the Society of Indian Vehicle Producers mentioned in January – the slowest progress tempo in 4 years, based on 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 definitely optimistic in regards to the announcement, and the autos sector being a relative laggard in latest quarters, so not shocking to see that sector bounce again fairly strongly,” James Thom, senior funding director on the Asian equities crew at Aberdeen, informed CNBC’s “Inside India on Monday.”
Modi’s tax overhaul might shore up India’s financial system, which the Reserve Financial institution of India sees rising 6.5% within the 2025-2026 fiscal 12 months, 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 an extra 25% levy on Indian imports — bringing whole duties to 50% — as a consequence 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] might greater than offset that affect of tariffs,” Aberdeen’s Thom mentioned.
“From a basic standpoint, completely, I believe the modifications to the GST regime can be supportive near-term for consumption because it comes by way of later within the 12 months. And consumption has been weak in India for fairly a while now, so this can be a actual form of increase to the financial system, in the event you like, given India’s financial system is so depending on home consumption.”
Home consumption is “some of the compelling indicators buyers are intently monitoring,” and the “largest driver of financial progress in India,” with a 61.4% GDP contribution within the 2024-25 fiscal 12 months, 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 ultimate consumption fee within the fiscal 12 months to the top of March 2026 will broaden 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.