India to cut taxes on hundreds of consumer goods to boost local demand following steep US tariffs

NEW DELHI — India has announced plans to reduce taxes on a wide range of consumer goods, including air conditioners and small cars, in an effort to boost domestic consumption and offset the impact of recent U.S. import tariffs.

Following the introduction of new tariffs by U.S. President Donald Trump last month, which posed a threat to India’s exports to the U.S., Finance Minister Nirmala Sitharaman announced the approval of reduced goods and services tax rates by a government panel. These new tax rates will come into effect on September 22, coinciding with a major Hindu festival.

The revised tax structure will consist of two rates – 5% and 18% – as opposed to the previous four-tier system. The majority of goods will see lower taxes, with some exceptions such as high-end cars and tobacco products facing a special 40% rate. Life and health insurance purchases will be exempt from tax.

This move is part of Prime Minister Narendra Modi’s efforts to protect the economy from the impact of U.S. tariffs, which are expected to affect billions of dollars worth of Indian exports.

In a statement, Modi emphasized that these reforms aim to improve the lives of citizens and promote ease of doing business, particularly for small traders and businesses.

The escalating trade tensions between India and the U.S. have led to concerns about job losses and slower economic growth. In response, India is looking to diversify its export markets by focusing on regions like Europe, Latin America, Africa, and Southeast Asia.

Negotiations with the European Union to enhance trade relations have gained importance as India seeks to reduce its reliance on the U.S. market. Additionally, the government is exploring financial incentives, including favorable loan rates for exporters, to support the export sector.