Trump's 50% tariff on India kicks in as Modi urges self-reliance

August 27, 2025

Prime Minister Narendra Modi has announced plans for significant tax cuts in response to Donald Trump's 50% tariffs on Indian goods, which could harm India's export-driven economy. The proposed tax reforms include simplifying the Goods and Services Tax (GST) system and implementing income tax cuts that analysts value at approximately $20 billion. Modi has emphasized the importance of self-reliance and domestic consumption while addressing crowds at Independence Day celebrations and other public events.

Who is affected

Indian export-driven industries supplying goods to American consumers
Millions of workers in sectors like clothing, diamonds, and shrimp exports
Indian consumers and small businesses who will benefit from tax cuts
Five million government employees and 6.8 million pensioners receiving salary increases
Consumer-facing sectors like scooters, small cars, garments, and cement manufacturers

What action is being taken

Prime Minister Modi is announcing and implementing tax reforms, including GST simplification
The Indian finance ministry is proposing a simplified two-tier GST system
India's central bank is reducing interest rates, having already cut rates by 1% in recent months
The government is increasing salaries for government employees and pensioners
Modi is promoting "Swadeshi" (Made in India) through public messaging and urging self-reliance

Why it matters

The US was until recently India's largest trading partner, making the 50% tariffs a significant economic threat
The tariffs are described as akin to a trade sanction between the world's biggest and fastest growing economies
Private consumption contributes nearly 60% of India's GDP, making tax cuts that boost spending critical
The reforms could help offset revenue losses through surplus tax collections and central bank dividends
S&P Global recently upgraded India's sovereign rating for the first time in 18 years, potentially lowering government borrowing costs and improving foreign investment

What's next

No explicit next steps stated in the article

Read full article from source: BBC