📰Modi Tries Tax Cuts | Daily India Briefing

Modi cuts goods and services taxes to bolster consumer spending. India and China seek closer ties. India seeks to shield steelmakers with increased tariffs.

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Macro

• Indian PM Narendra Modi said Vladimir Putin briefed him on Trump’s Alaska meeting, affirming India’s support for a peaceful resolution in Ukraine. Both leaders also discussed bilateral ties, while Putin shared similar takeaways with Brazil’s Lula.

• Indian bonds fell the most in nearly two years, with 10-year yields jumping 10 bps to 6.50 percent, as fiscal worries over Modi’s tax-cut pledge outweighed optimism from last week’s S&P upgrade.

• White House trade adviser Peter Navarro blasted India’s Russian oil purchases as “profiteering,” saying they undermine efforts to isolate Moscow. He warned that Trump will punish India with 50 percent tariffs unless it acts like a true US strategic partner.

• Indian equities are set for gains as Modi’s tax cuts and an S&P upgrade buoy sentiment despite US tariff uncertainty. Warming India-China ties boost stocks like InterGlobe Aviation, Minda Corp., and Kaynes Technology, though retail investors remain cautious.

• India’s unemployment rate eased to 5.2 percent in July from 5.6 percent in June, as rural hiring strengthened ahead of the festival season. While rural joblessness dropped, urban unemployment ticked up, with youth joblessness still elevated at nearly 19 percent.

Equities

• Goldman Sachs opened a new 70,000-square-foot Mumbai office in Worli, 50 percent larger than its previous site, as it expands in India where it employs 8,500 people, underscoring the market’s growing importance to the Wall Street bank.

• Hindustan Zinc will invest $438 million (₹38.23 billion) to build a 10-million-ton reprocessing plant to extract metals from tailing dumps. The project supports its goal of doubling annual capacity to 2 million tons.

• Kotak International has become the first Indian firm licensed by the UAE’s Securities & Commodities Authority to sell investment funds and portfolios to onshore retail investors, amid rising UAE interest in India.

• JSW Steel and South Korea’s POSCO signed a deal to explore building a 6 MTPA integrated steel plant in India, with Odisha among potential sites, though financial details and final location are yet to be decided.

• Maruti Suzuki chairman RC Bhargava called India’s proposed goods and services tax restructuring a “huge reform,” saying it will boost competitiveness, expand markets, and benefit customers by opening trade borders and encouraging competition in the country’s automotive and manufacturing sectors.

Alts

• Lawyers for Indian businessman Prateek Gupta skipped a London hearing in Trafigura’s $600 million (₹52.4 billion) nickel fraud case, citing funding troubles. Trafigura rejected the excuse, while a judge allowed nine Gupta documents to be used in a related arbitration next month.

• Heavy rains battered Mumbai, flooding roads, stalling traffic, and forcing school closures as parts of the city saw over 140 mm rainfall Monday. Authorities issued a red alert, while flights were disrupted and residents urged to stay indoors.

• Mahanagar Telephone Nigam defaulted on loan repayments worth $990 million (₹86.6 billion) to seven state-run banks, including SBI and PNB. The default covers $892 million (₹77.9 billion) in principal and $98 million (₹8.6 billion) in overdue interest.

Policy

• PM Narendra Modi, in his Independence Day speech, decried “economic selfishness” amid U.S. tariffs, pledging tax cuts, GST reform, and self-reliance in energy, defense, and key sectors to protect domestic industries and boost economic growth.

• The central gov. has proposed goods and services tax reforms, keeping only 5 percent and 18 percent slabs, shifting most goods from 12 percent and 28 percent brackets to lower rates, cutting taxes on daily-use and white goods, as part of PM Modi’s “Deepavali gift” initiative.

• India is slashing GST on small cars and motorcycles to 18 percent and premium cars to 40 percent, while EVs stay at 5 percent, aiming to boost auto demand and consumption.

• SEBI has proposed easing IPO norms by reducing the minimum public offer size for very large listings and extending the timeline for meeting 25 percent public shareholding to 5 years from 3. Retail investor allocation at 35 percent will remain unchanged.

• India’s market regulator SEBI proposed halving the minimum IPO size for firms above $57.3 billion (₹5 trillion) market cap to 2.5 percent, while extending public float timelines. The move aims to ease fundraising and encourage mega listings like Reliance Jio and NSE.

• India’s market regulator SEBI has proposed a phased restructuring of equity indices tied to derivatives contracts to curb manipulation. Analysts say the move could reduce external interference, following last month’s order temporarily barring U.S.-based Jane Street.

• U.S.–India trade talks scheduled for Aug. 25–29 in New Delhi were called off, delaying progress on a proposed trade agreement and dashing hopes of relief from new U.S. tariffs on Indian goods set to begin Aug. 27.

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1. Modi Moves to Cushion Economy With Tax Cuts

Prime Minister Narendra Modi unveiled sweeping changes to India’s goods and services tax (GST), a move aimed at bolstering consumption just as U.S. tariffs threaten to hit exports.

The new structure will consolidate the current four-rate system into two categories, reducing levies on key consumer goods, including cement, two-wheelers, and air conditioners. Officials said the simplified framework is expected to benefit households and small businesses, with limited pressure on government coffers. Approximately two-thirds of the GST revenue currently comes from the 18 percent category, providing a cushion against potential losses.

Markets cheered the announcement, with the NSE Nifty 50 rising as much as 1.6 percent in early trading on Monday, led by automakers and mid-cap firms. Economists estimate the changes could add 0.6 percentage points to nominal growth and lower inflation by as much as 0.8 points over the coming year. “Simplifying the GST structure is a welcome reform toward boosting domestic consumption,” said Madhavi Arora of Emkay Global.

The timing of the announcement, made during Modi’s Independence Day speech, was striking, coming less than two weeks before President Donald Trump is set to double tariffs on Indian goods to 50 percent as punishment for Russian oil purchases. Analysts say the tax cuts could help soften the impact of lost export demand by lifting domestic spending, which accounts for more than 60 percent of GDP.

The proposals will be taken up by the GST Council in September, with implementation expected later this fiscal year.

2. India, China Seek Closer Ties as Trump Tariffs Unsettle Asian Giants

India and China signaled a thaw in ties on Monday, with Foreign Minister Subrahmanyam Jaishankar saying both countries want to “move ahead” after years of strain, even as escalating U.S. trade policies add urgency to normalize relations.

Jaishankar met his Chinese counterpart Wang Yi in New Delhi, marking the first high-level Chinese visit in three years. “Differences must not become disputes, nor competition conflict,” he said. Wang is also scheduled to meet National Security Adviser Ajit Doval to discuss the long-running border dispute, before calling on Prime Minister Narendra Modi on Tuesday.

The meetings will set the stage for Modi’s planned trip to China later this month for the Shanghai Cooperation Organisation summit, his first in seven years. The outreach comes after years of rocky relations, including a deadly 2020 border clash. Signs of détente are emerging, with Beijing easing fertilizer export curbs and New Delhi reinstating visas for Chinese travelers.

Trump’s tariff shockwaves are providing additional motivation. Washington has raised duties to 50 percent on Indian exports and threatened sanctions over oil purchases from Russia. Chinese exporters have also been hit by U.S. tariffs, creating common ground for both Asian powers to hedge against American pressure.

“Overall, it is our expectation that our discussions would contribute to building a stable, cooperative and forward-looking relationship between India and China,” Jaishankar said.

3. India Moves to Shield Steelmakers With Tariffs

India has recommended a three-year safeguard duty on select steel imports, escalating efforts to shield its domestic industry from a flood of cheap Chinese supply made worse by U.S. tariffs.

The Directorate General of Trade Remedies (DGTR) proposed a levy starting at 12 percent in the first year, tapering to 11.5 percent and then 11 percent by the third. The agency flagged a “sudden, sharp and significant” jump in inbound shipments that threatens “serious injury” to Indian producers. A temporary 12 percent tariff was already imposed in April for 200 days, but the DGTR’s latest call seeks to lock in protection for longer.

Global distortions are intensifying pressure. With Washington maintaining 50 percent tariffs on Chinese steel, and other countries from South Korea to Vietnam layering on anti-dumping duties, unsold volumes are piling up across Asia. That overhang has redirected flows toward India, one of the fastest-growing steel markets, sparking fears of a supply shock undermining margins for domestic players like JSW Steel and Tata Steel.

New Delhi’s response mirrors a wider global turn inward, as even Japan’s steel lobby pushed for stricter safeguards this week. For India, the balance is delicate: keeping prices stable for downstream industries like construction and autos, while protecting local capacity from being swamped by global oversupply.

See you tomorrow.

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

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