📰India Cuts Taxes | Daily India Briefing

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India announces tax overhaul to boost consumer demand. Germany pushes for EU-India trade deal. India’s shadow banks’ IPO boom stalls.

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1. India Cuts Taxes to Boost Consumption

Finance Minister Sitharaman

India has offered to reduce tariffs on U.S. goods to zero, a move that could reopen the door to trade negotiations even as Washington’s steep duties on Indian exports take effect.

In a social media post on Monday, Trump claimed New Delhi’s concession came “too late” and should have been made “years ago.” Still, the remarks suggest some scope for talks after months of escalating tensions.

India’s Commerce Minister Piyush Goyal echoed that sentiment on Tuesday, saying both sides were “in dialog” for a bilateral trade agreement. Formal negotiations remain on hold after a U.S. team canceled its August trip to New Delhi, but officials have kept informal communication channels open.

Trump imposed tariffs of up to 50 percent on Indian exports to punish the country for what he called “obnoxious” trade barriers and its increased purchases of Russian oil. India had previously offered to cut levies on industrial goods such as auto components and pharmaceuticals if Washington reciprocated. Talks broke down, however, over U.S. demands to open India’s sensitive dairy and agriculture markets.

Analysts say Trump’s latest comments may signal a shift toward compromise. “This is his attempt to walk back on his earlier hardened stance,” said Abhijit Das, a former Indian trade official.

For now, both countries appear reluctant to let the dispute derail ties entirely, with negotiators still searching for common ground.

2. Germany Pushes for EU-India Trade Deal

Germany and India’s foreign ministers

German Foreign Minister Johann Wadephul said on Wednesday he hopes a long-delayed free-trade agreement between the European Union and India can be concluded as early as this autumn, injecting urgency into talks that have dragged on for nearly two decades.

“Germany is strongly in favor of the trade agreement between the EU and India being quickly agreed,” Wadephul told reporters in New Delhi after meeting his Indian counterpart, Subrahmanyam Jaishankar. “We can, if we want to, conclude this agreement by this fall and then quickly enter a ratification process.”

Negotiations have long been hampered by disagreements over agriculture and market access, but momentum has grown as New Delhi faces steep new tariffs from Washington.

Jaishankar said he shared Wadephul’s “desire and optimism” about the deal, stressing that it had taken on “greater urgency” amid trade tensions. “It’s in our mutual interest that we lower tariffs and expand our economic cooperation,” he said.

The push for an EU-India pact comes as Modi deepens engagement with multiple partners to hedge against reliance on any single bloc. Analysts say the deal could not only boost trade but also reinforce political ties between Brussels and New Delhi at a time of geopolitical strain.

3. Indian Shadow Banks’ IPO Boom Stalls

India’s shadow banking sector, the non-bank finance companies (NBFCs) that lend to households and small businesses outside traditional banks, is seeing its once-hot IPO pipeline cool off. A few years back, these lenders were riding a boom: easy credit, strong economic growth, and investor enthusiasm for high-yield plays made NBFCs the darlings of the market. Companies like SK Finance (backed by TPG Inc.) and Belstar Microfinance, which had been planning public listings, have now paused their IPOs, joining others like Veritas Finance, Aye Finance, and Avanse Financial Services in shelving launches despite getting regulatory nods.

The slowdown reflects deeper problems. Many shadow banks have overextended into unsecured loans, facing rising bad debts and weaker repayment from households under stress. A June RBI report highlighted mounting funding costs and deteriorating asset quality as vulnerabilities. Publicly listed peers, including Bajaj Finance and Shriram Finance, have lagged behind the Nifty, while HDB Financial Services’ IPO went out at a sharp discount to its private-market value.

Even as India’s overall IPO market is poised for a record year, global trade headwinds and U.S. tariffs are squeezing labor-heavy sectors—core borrowers for NBFCs—forcing lenders to tighten credit standards. What was once an IPO feeding frenzy for shadow banks now feels cautious, with risk suddenly front and center.

See you tomorrow.

Written by Eshaan Chanda & Yash Tibrewal. Edited by Shreyas Sinha.

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