India Defies US Pressure: 50% Tariffs Trigger Govt’s Push on GST, Reforms, Export Diversification

India from 27 August is having 25% additional tariffs imposition on Indian exports to US. Now India is amongst the countries which are facing highest tariffs from US.

Also read: Trump’s Proposed Tariffs Shake Up India’s Trade Strategy

India has kept Trade lines closed for the US in sensitive sectors to secure its national security. It has taken a firm line for securing oil trade supply with Russia to meet the nation’s energy needs. 

US had continuously warned India. They asked India to stop crude oil trade with Russia. They also wanted to provide access to US producers in the sensitive dairy sector of India. US had already applied 25% tariffs before and 25% additional tariffs post Trade deals blockage citing reasons such National security.

Indian Government in retaliation have started beginning GST restructuring bringing GST reforms in the country. This prompted New Delhi to initiate complex reforms to maintain Trust in economy and bring investments ahead.

‘Swadeshi’ is the call for the nation in current scenario

PM Modi met with the Economic Advisory Council. He sought policy advice on promoting ease of doing business. He also aimed to maintain living standards despite existing trade sanctions. 

PM Modi emphasised on the need for pursuing “Self-centred economic policies.” He also highlighted the importance of promoting made in India products. This approach helps in maintaining Swadeshi principles. 

He urged citizens and businesses to purchase ‘Made in India’ products exclusively. He also encouraged them to promote these products. This approach aims to achieve national self-reliance and development. 

“I am asking our shopkeepers and traders. Do not sell foreign goods. This will provide a huge boost to the Make in India movement. Small contributions by each one will go a long way in achieving self-reliance. The PM has maintained his firm stance against external pressures.

It appears as if Modi – Trump polices are same with regard to promoting Nation based products.

PM Modi emphasised that protecting interest of domestic producers is of paramount importance.  “For Modi, the interests of farmers, cattle reapers and small-scale industries are paramount. Pressure on us may increase, but we will bear it all,” the PM affirmed.

Reduction in GST rates, efforts made to revive Domestic consumption

The changes in the Taxation system are endorsed. The tax Slab rates are revised from 12% and 28% to 5% and 18% respectively. The group of state Finance ministers have endorsed the decision. Final approval is awaited from GST council headed by finance Minister Nirmala Sitharaman. 

The Modi government anticipates reduced slab rates. This will boost domestic consumption, particularly on items of daily use like food and clothes. According to IDFC First Bank’s analysis, this tax reduction could enhance nominal GDP growth by 0.6 percentage points within a 12-month period.

To simplify the taxation system, all textiles and food items will be included in the 5% tax bracket. This change aims to make the system straightforward by eliminating classification. The upcoming GST council meeting on 3 and 4 September will consider reducing tax rates on several items. These include Cement, commonly used services like Salons and beauty parlours, and insurance products for individuals.

Introducing “Next Generation reforms”

PM Modi spoke of “next-generation reforms” in his August 15 Independence Day address. This could include policy adjustments to lower business compliance expenses and eliminate unnecessary legislation.

According to a recent report released by Government website, operating two different units is more cost effective. Each unit has 150 workers. Bloomberg finds this approach better than operating a single unit with a total of 300 workers. This is better than operating a unit with a total of 300 workers. Such large-scale operations in a single unit also leads to inefficiency. 

Current labour regulations mandate double wages for overtime work. This leads many employees to keep workers on an informal basis for overtime. Employers do this for target completion. 

Modi has established two high-level committees to address these policy requirements. One group, which conducted its initial meeting last week under Cabinet Secretary TV Somanathan’s leadership, will concentrate on state-level deregulation. 

The second committee is headed by Rajiv Gauba from the Niti Aayog think tank. It will develop proposals for the next-generation reforms outlined by Modi. This information was reported.

Talking about the reforms push, commerce minister Piyush Goyal recently said that several options are being evaluated. We are looking for both big and small ideas. We would like to decriminalise as many laws as we can. Our goal is to reduce the regulatory burden on industry.

Maybe we won’t be able to deliver 100% but we’ll make a sincere effort…We have decriminalised 355 sections in Jan Vishwas Bill 2.0, I want to take it up to 1,355. The select committee is going to be seeking suggestions. If required, I’ll introduce a completely new bill,” he said.

Regarding sector-specific policies, especially for labour-intensive industries, authorities are reviewing GST restructuring possibilities. “We’ll see how we can support many of these labor-intensive sectors. These include industries like food processing and textiles. We aim to boost domestic demand through the GST framework. Our ministry and different line ministries are already looking at complementarity of our strength areas with other economies,” he said.

RBI extends support for Indian economy

RBI Governor Sanjeev Malhotra extended confidence in the Indian economy. He reiterated his point. The Central Bank is ready to protect the Indian economy from the impacts of US 50% additional trade tariffs. It also highlighted initiatives to promote local currency trade as part of the rupee’s internationalisation strategy.

“RBI has always been very proactive. They focus on whatever needs to be done for the betterment, advancement, and growth of our country,” Malhotra said. Speaking about the US tariff, he elaborated. He mentioned, “Post the tariff announcement in April, we had projected downwards our GDP growth by 20 basis points.” There has been an additional 25% tariff making it 50%. It is set to kick in, in another couple of days. We are hopeful trade negotiations will play out and also expect that the impact will be minimal.

Regarding the strategic initiative to internationalise the rupee, Malhotra said: “This is an important area. The RBI has been working on this for a long time. It’s important for countries to develop trade in local currencies. And so the RBI has also been moving in this direction. Today, we have agreements with four countries: Maldives, Mauritius, Indonesia and UAE, and trade is starting. It has certainly helped industry. It also benefits the economy as a whole. This is because it cushions us from the volatility of foreign exchange price movements.”

Current Steps taken by Indian government to mitigate tariffs impact

The United States has imposed a steep 50% tariff on Indian goods, effective August 27, 2025. In response, India is rolling out its first strategic countermeasure. This involves an aggressive push to boost textile exports across 40 key global markets. 

These include major economies such as the UK, Japan, and South Korea. They also include Germany, France, and Italy. Additionally, Spain, the Netherlands, and Poland are part of these economies. Canada, Mexico, and Russia are included as well. Other major economies are Belgium, Turkey, the UAE, and Australia. 

The initiative is coordinated through Export Promotion Councils (EPCs). They will capitalize on Free Trade Agreements (FTAs). Participation in international trade fairs will strengthen India’s presence as a dependable supplier of sustainable textiles.

 This plan marks a decisive move to mitigate the impact of punitive U.S. tariffs by diversifying export destinations and reducing overdependence on the U.S. market, particularly in light of the textile sector’s vulnerability to the tariff shock.

The strategies being planned include greater participation in international trade fairs. Promotional campaigns will project India as a reliable supplier of high-quality and sustainable textiles. There will be diversification into emerging markets where India has so far had limited presence. Officials also indicated that India will use the situation to strengthen its competitiveness. This will be done through production-linked incentive schemes. GST adjustments will be made. There will be faster implementation of next-generation trade reforms.

Textile Push

This move comes amid growing concerns among exporters. These concerns are particularly strong in hubs such as Tirupur, Noida, and Surat. In these places, production schedules have already been disrupted due to delays and cancellations of U.S.-bound orders. 

The Federation of Indian Export Organisations (FIEO) had earlier flagged a concern. The new tariffs would erode cost advantages. They would also hurt India’s global competitiveness. Therefore, the government’s textile push is seen as a defensive step to protect employment. It is also a proactive measure to secure foreign exchange and maintain India’s trade momentum. This is crucial in the face of Washington’s protectionist stance.

The diversification strategy highlights India’s determination. They refuse to bow to external pressure. Instead, they view the challenge as an opportunity. India aims to expand its global footprint in textiles and apparel.

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