India’s Prime Minister Narendra Modi was held at the National Independence Day ceremony held on Friday, August 15th, 2025 at the Red Fort, New Delhi, India.
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Indian markets gathered on Monday, and the tax cuts revealed recently by Prime Minister Narendra Modi expanded the gifts for the domestic economy, which is still facing the teeth of US tariffs.
The Nifty 50 index rises by 1%, while the BSE Sensex adds 0.84%. In currency, the US dollar surrendered 0.18% against the rupee.
In a massive Independence Day speech on Friday, Prime Minister Narendra Modi worked together to push for independence and proposed a series of financial reforms. New Delhi is currently planning a two-rate structure of 5% and 18% under widespread changes to its Goods and Services Tax (GST) regime, and is planning to abolish the previous 12% and 28% taxes imposed on some items, Reuters said on Friday. The news was also reported by local media.
“The reform aims to simplify compliance, lower tax rates, and modernize the GST framework to make it growth-oriented. Industry executives have hoped for measures such as streamlining rates on two slabs, alleviating tax burdens on micro, small and medium-sized enterprises (MSMEs), reducing taxation on essential products, and adding pre-entered returns. Logistics, housing and consumer goods can benefit.
India’s automotive industry could emerge as one of the beneficiaries of the new tax policy after slowing in recent months. According to Reuters, Indian passenger cars, including cars, added 4.2% in 2024.
Stocks in the automotive sector rose during Monday’s session. India’s Marti Suzuki added 8.75%, while Hyundai Motor India rose 8.15%.
“I am certainly positive about this announcement and it is not surprising to see the sector bounce so hard, as the automotive division is a relative delay in the recent quarter,” James Tom, senior investment director for Aberdeen’s Asian Equity Team, told CNBC “in India on Monday.”
Modi’s tax overhaul could strengthen India’s economy, with the Reserve Bank of India expecting it to increase by 6.5% in the 2025-2026 fiscal year. In particular, New Delhi has fallen to the crosshairs of President Donald Trump’s administration over the ongoing purchase of Russian crude oil, and Washington has charged an additional 25% collection on Indian imports as it will take effect at the end of this month.
“India is a domestic consumption story. Exports are relatively small contributors. So this (tax overhaul) could be more than offsetting the impact of tariffs,” said Tom of Aberdeen.
“From a basic perspective, I think absolutely, the change in the GST government will be a supportive recent period for consumption, as it comes later in the year. And since consumption has been weak in India for quite some time, this is really a boost for the economy given that India’s economy is highly dependent on domestic consumption.”
Domestic intake is “one of the most compelling indicators closely monitored by investors,” and is “the biggest driver of India’s economic growth,” with a contribution of 61.4% for the 2024-25 fiscal year.
“In particular, changing urban consumption and luxury spending preferences have emerged as a key pillar of this momentum.”
Meanwhile, India’s ratings and research will increase India’s private consumption rate by 6.9% per year for the fiscal year ending March 2026, surpassing the broader GDP growth outlook over the period, with a low real wage increase, a decline in household savings and promotion to personal loans.
“The sharp decline in inflation has improved our prospects for a stable increase in consumption in fiscal 2024,” he added. India’s retail inflation slowed from 4.31% in January to its lowest level since 2017, reaching 1.55% in July.
