PM Modi’s Masterstroke to Neutralize Trump’s Tariffs; India Set to Rise as US Watches in Frustration

Business News: Soon after the United States announced steep tariffs on Indian goods, the Modi government responded with a surprise move. On August 15, during his Independence Day address from the Red Fort, Prime Minister Narendra Modi declared a reduction in Goods and Services Tax (GST). The announcement is expected to bring relief not only to ordinary citizens but also to businesses struggling with rising costs.

A Surprise for Officials and States

Although discussions around GST reforms had been underway for some time, very few anticipated such a bold decision arriving so quickly. The announcement even caught several central and state officials off guard, as many were unaware of the final decision beforehand. The timing of the move is significant, coming at a moment when trade relations between India and the US are under strain due to Washington’s new tariff measures.

Lower Taxes, Simpler Rules

According to the government, cutting GST rates will reduce the burden on consumers and encourage higher spending in the market. The Prime Minister also underlined the need to remove outdated and unnecessary laws, making it easier to start and operate businesses in India. Currently, entrepreneurs face numerous hurdles in the form of permits, clearances, and paperwork, which often delay projects and discourage investment. The government aims to ease these bottlenecks through a more business-friendly framework.

Committees to Drive Reforms

To push these reforms forward, the Centre has set up two key committees. The first, led by Cabinet Secretary T.V. Somanathan, will work on simplifying regulations at the state level. The second, chaired by NITI Aayog’s Rajiv Gauba, will focus on broader policy shifts. At the same time, relief measures are being considered for industries most affected by US tariffs, such as textiles, footwear, and jewelry. Proposals include offering low-interest loans and expanding support to help exporters enter new markets.

Overhaul of GST Slabs

One of the most notable changes is the proposed restructuring of GST slabs. The existing four-tier system of 5%, 12%, 18%, and 28% may be replaced by just two categories: 5% for essential goods and 18% for other items. Additionally, luxury and sin goods like liquor, tobacco, and high-end cars could face a 40% tax rate. Economic analysts suggest that these adjustments may boost India’s GDP growth by around 0.6% within a year, as consumer demand rises and business activity strengthens.

Strong Economic Indicators

India’s overall economic outlook remains positive. Inflation is under control, banks are on solid footing, and rating agency S&P has recently given India an improved credit assessment. Sanjeev Sanyal, a member of the Prime Minister’s Economic Advisory Council, noted that this is the right time to implement reforms that have long been delayed. Economist Sonal Verma from Nomura added that the GST changes are not just a counter to US tariffs but also a clear signal to the world that India is serious about making its economy more investment-friendly.

The government’s decision marks an important shift at a critical time. By cutting GST and simplifying business regulations, India aims to shield its economy from external shocks while boosting domestic consumption. For households, this means cheaper essentials; for businesses and investors, it offers a smoother environment to grow and compete globally. In essence, India is turning a trade challenge into an opportunity for deeper economic reform.