In an economy preparing for severe US tariffs, economists say Indian Prime Minister Narendra Modi’s drive to lower consumer taxes on common commodities might boost demand and provide billions of dollars in annual relief.
US President Donald Trump has threatened to boost India’s import taxes from 25% to 50% as retaliation for New Delhi’s imports of Russian oil, claiming that the purchases enable Moscow to finance its invasion of Ukraine.
With Indian exporters warning of sharply declining orders and significant job losses, the proposed policy has cast a pall over the future of the fifth-largest economy in the world. In an annual speech to commemorate India’s independence, Modi pledged last week to “bring down the tax burden on the common man,” a move that New Delhi has referred to as “unfair, unjustified, and unreasonable.”
Economists claim that his planned GST reduction would lower the cost of everything for consumers, from air conditioners to small cars. At the moment, the tax has a complicated four-tier structure and rates that range from 5% to 28%. The majority of items would be subject to either a five percent or an eighteen percent tax under Modi’s policies.
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