📰Modi's Tax Cuts, Russian Oil Imports Trimmed, GDP Slows | Daily India Briefing

Details emerge on Modi’s goods and services tax cuts. India’s refiners are set to reduce their Russian crude purchases. India’s economy likely slowed in the April–June quarter to 6.7 percent.

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Macro

• Indian equities opened weaker as global volatility, looming U.S. tariffs, and fiscal concerns weighed on sentiment. While bargain hunters eyed tech stocks and the government projected resilience, debt markets reflected caution with investors scaling back long-bond bets.

• One of India’s top long-bond bulls has slashed exposure to the 2053 government bond, citing oversupply and weak demand. While still bullish on bonds overall, he shifted to 14–15 year maturities for stronger yield compression potential.

• Indian bond traders are urging the RBI to intervene after institutional demand for government debt dried up, sending yields sharply higher. The 10-year benchmark yield has risen 24 basis points in August, driven by Prime Minister Narendra Modi’s newly announced goods and services tax cuts that raised fiscal worries.

• India is considering using gas-fired plants only during May and June to meet peak summer demand, given their high costs. Gas now contributes just 1.5 percent of India’s power mix, down from 3 percent in 2020, due to soaring fuel prices.

Equities

• Suzuki Motor Corp. will invest over $8 billion (₹701.1 billion) in India over the next five to six years as it begins producing its first e-Vitara electric SUVs in Gujarat. The plant, set to reach 1 million-unit capacity, will export to 100+ countries.

• Nayara Energy has appointed industry veteran Teymur Abasguliyev as its new CEO amid rising operational challenges. Abasguliyev, formerly CFO of Azerbaijan’s state oil company SOCAR, will officially take charge in September.

• Papa John’s will re-enter India in October with plans to open 650 stores by 2035, its franchise partner said. The chain, which exited in 2017 after weak sales, follows Little Caesars’ expansion push into India earlier this year.

Alts

• Madhvani Group is in talks with Cerberus Capital for a $190 million (₹16.7 billion) private credit loan to fund its acquisition of Hindustan National Glass & Industries. The Ugandan conglomerate also plans to invest $1.1 billion (₹96.4 billion) in India over five years.

• TPG-backed SK Finance has shelved its planned $183 million (₹16 billion) India IPO after failing to attract sufficient demand, even after reducing the offer size. The non-bank lender’s approval expires this week, highlighting persistent investor caution toward shadow banks.

• Catamaran Ventures, billionaire Narayana Murthy’s family office, is urging caution on India’s startup valuations as funds exit investments at steep discounts. President Deepak Padaki said Catamaran is slowing startup bets, instead pivoting toward manufacturing supply chains like aerospace, EVs, and electronics.

• Vodafone Idea’s infrastructure unit plans to raise up to $570 million (₹50 billion) through a short-term bond sale in September. The company, India’s third-largest carrier, is eyeing two- and three-year tenors worth 30 billion and 20 billion rupees.

• India’s Jakson Engineers will invest over $914 million (₹80.1 billion) to build a 6 GW solar cell and module plant in Madhya Pradesh. The project supports India’s target of 500 GW clean energy by 2030, expanding Jakson Group’s renewable manufacturing capacity.

Policy

• India plans to deploy its homegrown missile defense shield, Sudarshan Chakra, by 2035 to protect strategic and civilian sites, defense chief Anil Chauhan said. Modeled after Israel’s Iron Dome, the system faces steep technical and cost challenges, experts caution.

• India’s Supreme Court has ordered a probe into allegations against Vantara Greens, the wildlife rescue center run by Anant Ambani, Mukesh Ambani’s son. The panel will investigate claims of illegal animal acquisition, financial irregularities, and mistreatment, with findings due September 12.

• India’s pension regulator is weighing whether to let funds invest in gold ETFs and relax rules on REITs and infrastructure trusts to boost returns. Pension assets have surged to $176.9 billion (₹15.5 trillion), and managers argue for greater investment flexibility.

• India reaffirmed support for the Quad grouping ahead of Prime Minister Narendra Modi’s August 29–30 visit to Japan, where critical minerals cooperation will be a key agenda item. The trip comes amid strained India-U.S. ties, with Modi also scheduled to visit China soon after.

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1. Details Emerge on Modi’s Tax Cut Plan

In an attempt to stimulate the economy amidst unprecedented trade volatility, Prime Minister Modi plans to simplify the goods and services tax. The four-tiered system, criticized for its complexity, would be reduced to just two rates. Goods currently taxed at 12 percent would drop to 5 percent, while most items in the 28 percent bracket would move to 18 percent. Essential products such as food and medicines would remain at low or zero rates, while consumer durables like cars and televisions would shift to the middle tier.

Economists say the changes could boost disposable income, cut inflation by as much as 0.8 percentage points, and lift nominal GDP growth by 0.6 points over the next year. The timing is deliberate: New Delhi hopes to have the new rates in place by October, ahead of Diwali, India’s biggest shopping season.

Over a quarter of India’s federal tax revenue comes from GST, the largest contributor source of revenue outside of income tax. The federal government has a revenue sharing agreement with each state, meaning this will hurt their budgets as well.

While short-term tax revenue may dip, forcing the government to cut essential services or borrow more debt, Modi’s BJP controls or shares power across most of India, improving the odds of approval of the policy. For now, the gamble reflects a broader strategy: with global trade increasingly uncertain, India is turning to its vast domestic market to keep growth on track.

2. India to Trim Russian Oil Purchases as Tariffs Bite

India’s refiners are set to reduce their Russian crude purchases, another cautious nod to Washington’s pressure ahead of fresh 50 percent US tariffs. State-run firms and private processors such as Reliance are expected to scale back imports to between 1.4–1.6 million barrels per day from October, down from an average of 1.8 million barrels in the year’s first half, according to people familiar with the matter.

The move comes as the Trump administration ratchets up its trade offensive, accusing New Delhi of funneling excess profits to Moscow’s war chest. From virtually negligible volumes before 2022, Russian oil now makes up 37 percent of India’s imports, an unprecedented reliance that has become a flashpoint in bilateral relations.

Still, the adjustment looks more tactical than strategic. India has no plans to sever its energy ties with Moscow, whose discounted Urals crude has been central to keeping domestic pump prices stable. Instead, refiners are hedging, adding cargoes from Saudi Arabia, Brazil, and the US, while waiting to see whether trade negotiations yield relief.

For Washington, the optics matter: forcing at least a symbolic reduction ahead of the Aug. 27 tariff hike. For New Delhi, the aim is to show flexibility without giving up cheap barrels that underpin its inflation fight. Volumes could quickly rebound if a deal emerges, but until then, India is testing just how much it can trim without spooking its own economy.

3. India's Growth Slows

India’s economy likely slowed in the April–June quarter to 6.7 percent, according to a Reuters poll, as subdued private investment and weak factory activity offset a surge in government spending. That marks a step down from 7.4 percent growth in the previous three months and signals momentum may cool further through the year.

Capital expenditure jumped 52 percent year-on-year, with New Delhi front-loading infrastructure projects to cushion demand. But the Reserve Bank of India’s 75 basis points of rate cuts during the quarter, including a surprise half-point move in June, have yet to revive private investment. Many banks have been slow to pass lower borrowing costs to businesses and households.

Economists said India’s vulnerability lies in stagnant wages, job cuts in urban areas, and the fallout from US tariffs that threaten exports to the country’s largest trading partner. “Industrial growth has not been very good, and manufacturing is showing sluggish signs,” said Madhavankutty G of Canara Bank. “Tariffs and global uncertainties have slowed private capex.”

Growth is expected to ease to 6.5 percent in July–September and average 6.3 percent this fiscal year — the weakest pace in five years. Economists warn that at those levels, India risks falling short on job creation. “Government expenditure can take some of the load,” said Piramal’s Debopam Chaudhuri. “But without a private investment recovery, we won’t generate enough high-quality employment.”

See you tomorrow.

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

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