NEW DELHI — On Tuesday, India’s Finance Minister Nirmala Sitharaman made it clear that the country’s most recent changes to the Goods and Services Tax (GST), which have changed the tax brackets and lowered rates on many items, were not a quick response to U.S. President Donald Trump’s recent tariff increases. Instead, they were part of a long-term plan.
At the NDTV Profit GST Conclave, the Finance Minister stressed that the reform package had been in the works for more than a year and a half. She said, “These changes have been in the works for the past year and a half.” She also said that she only believed that the steps were important enough to show to Prime Minister Narendra Modi in May. She said that this timing shows that the reforms are part of a planned economic exercise and not a response to shocks in the world.
She downplayed the idea that the GST changes were a direct response to the tariffs, but she didn’t say the problem wasn’t severe. She said that a 50% duty from the U.S. is a big deal, especially for Indian exporters who depend on the American market a lot. She stated that the administration is actively looking into how big the losses are in the affected sectors and is thinking about ways to help lessen the damage. “We need to look at the industry that is exposed to the U.S. Some information is trickling in, and the government is working on a fix. “We are keeping all doors open on our end,” she said.
The Finance Minister also said that diplomatic teams are now talking to the U.S. and that trade talks are still going on to solve the problem. The government is also trying to protect Foreign Direct Investment (FDI) from any negative effects that might come from the new tariff system.
Sitharaman said that the urge for reform was linked to the political situation after the election, when the BJP was trying to strengthen its NDA alliance after winning back power. She also talked about how people feel about the market. She said that even if there are still a lot of uncertainties in the world, investors shouldn’t assess reforms by how the market reacts right away. “I don’t think I’m worried about how the markets will react right away,” she said, showing that she was more interested in long-term structural benefits than short-term volatility.
The GST changes that went into effect on September 22 made the system easier to understand by adding a 40% slab for luxury and “sin” goods and a two-rate structure of 5% and 18%. The adjustments have lowered prices on a lot of things, from cars to everyday items, in an effort to get people to buy more things at home. Some commentators have said that the timing of the reforms is good since they would help the economy deal with the impact to exports from U.S. tariffs. The Finance Minister’s comments, on the other hand, support the government’s story of a planned, domestic-first reform strategy.