India-US Tariff War / Modi's Brahmastra makes Trump's tariff ineffective, India will take a big leap

India-US Tariff War: As soon as the US announced heavy taxes on Indian goods, the Modi government took immediate action and announced a reduction in the Goods and Services Tax (GST) in Prime Minister Narendra Modi's speech from the Red Fort on August 15. This move will not only provide relief to the general public in the form of cheaper goods, but will also make it easier for businessmen to do business. This decision also surprised many government officials, because GST reforms were being discussed for a long time, but no one expected such a big announcement so soon. Some state governments also did not have prior information about it.

Tax reduced, rules easier

The Modi government is now moving towards comprehensive change. The tax on goods and services will be reduced and tax rules will be simplified. The government believes that this will save more money in the pockets of the people, which will increase purchases in the market. PM Modi also said that old and complex laws will be abolished so that businessmen can work easily. Currently doing business in India is challenging, as many types of paperwork, permits, and government approvals are required. This stalls big projects and also deters foreign investors.

Formation of new committees

The government has formed two big committees that will work on simplifying the rules in the states and the next round of reforms. The first committee will be headed by Cabinet Secretary TV Somanathan, who will focus on changes at the state level. The second committee will be headed by Rajiv Gauba of NITI Aayog, which will give policy suggestions at the national level. Apart from this, the government is considering giving relief to companies that export goods like clothes, shoes, and jewelry to the US. For this, steps like loans at cheap interest and assistance in selling goods in new markets are being considered.

Further improvements in the GST system

The government is planning to reduce the existing four tax slabs of GST (5%, 12%, 18%, and 28%) to two slabs (5% and 18%). Only 5% tax will be levied on essential goods. Also, there is a proposal to impose 40% GST on ultra-luxury goods and 'sin goods' (such as alcohol, cigarettes, luxury cars). IDFC First Bank estimates that this tax cut can increase India's economic growth by 0.6% in the next one year. This will make food items, clothes, and other everyday items cheaper, which will encourage shopping.

Strong economic condition

India's economic condition is currently considered strong. Inflation is under control, the banking sector is stable, and the international rating agency S&P has also described India's credit rating as better. Sanjeev Sanyal, a member of the Prime Minister's Economic Advisory Council, says that this is a golden opportunity for India to implement long-pending reforms. Sonal Verma, an economist at Nomura Financial, says that these reforms are not only a response to the US tax, but also send a message that doing business in India is now becoming easier than ever.