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A Hectic Week — Tariff, Tax & Turmoil
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Good Morning. To call last week eventful would be an understatement. From a Goods and Services Tax (GST) reform announcement by Prime Minister Narendra Modi, to a Donald Trump-Vladimir Putin meeting, to White House trader advisor Peter Navarro’s attack on India — the week has been a hectic one at home and around the globe. However, there are little answers on Trump’s tariffs on India, and how the GST changes would play out.
In other news, the bill to ban online gaming has now been passed by the Rajya Sabha. Meanwhile, Parle, Britannia, Amul still rule India’s fast moving consumer goods (FMCG) spends.
Trump, Putin, GST: A Hectic Week For India And The World
It has been a hectic week in India and the world at large. Last Friday saw the much-anticipated summit between US presidentTrump and his Russian counterpart, Putin, at Anchorage in Alaska, to find a solution that would end the war in Ukraine.
This Friday, all eyes are on Jackson Hole, Wyoming, where central bankers of the world get together for their annual powwow. The world wants to know if the chairman of the US Fed, Jerome Powell, would give any indication of the likely policy action at the Fed’s September meeting
Last Friday was also the 78th anniversary of India’s Independence. The Prime Minister addressed the nation from the ramparts of the Red Fort and reiterated his determination to shield the interests of India’s farmers and fishermen from any harm. This made it clear that India would not sign a trade deal with the US that would open up India’s agriculture, dairy and fisheries to unrestricted American produce.
Navarro Targets India
Trump has been, for mysterious reasons, wooing Pakistan, calling its army chief to Washington twice in quick succession, reducing the reciprocal tariff on Pakistan to 19%, lower than not just the initial proposal of 29% but also the tariff proposed for imports from India.
The tariff on India has been pegged at 25%, but Trump later said that since India continues to buy Russian oil, besides Russian arms, another penal slab of 25% duty would be added, bringing the total tariff burden to 50%. Trump has also promised to help Pakistan develop its mysterious new oil reserves, and sell oil to India, and its ‘dead economy.’ In Trump’s book, growing at an annual rate in excess of 6% and faster than anything else around is a sign of being dead, it would appear.
After the summit with Putin, Trump would appear to have eased off on the punitive tariff layer for buying Russian oil. However, that did not prevent his trade counsellor, Peter Navarro, from publishing an article in the Financial Times, in which he accused India of providing the financial lifeline for Russia’s Ukraine war by buying Russian crude and ‘laundering’ it in India before exporting refined products around the world.
Navarro chose to ignore the fact that China is the biggest buyer of Russian oil and gas, and that the US itself buys Russian uranium, fertilisers and palladium. Neither Navarro nor his master probably wants to take on China. Trump has de-emphasised penalising buyers of Russian oil in the wake of the summit with Putin.
Luxury Tax Trap
The Prime Minister announced major reform of GST in time for Diwali. The tax would be rationalised to have only two slabs, he said, a standard rate and a merit rate. Later, officials have let it be known that there would be four or even five slabs — the standard 18% rate, a merit rate of 5%, a 40% rate for luxury and sin goods, and possibly yet another low rate for gold, besides a zero rate.
While the rationalisation of GST is welcome, some questions do arise. Since GST is a tax in which the states have as much stake as the Centre, should the leader of the central government unilaterally announce changes to the tax?
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CORE NUMBER
65.2
This is how much India’s private sector economy grew in August, rising over four points from 61.1 in July. It's the fastest pace since records began in 2005, according to an S&P Global report titled HSBC Flash India PMI Index.
Why It Matters: A PMI above 50 signals expansion. At 65.2, India is not just expanding but surging — far ahead of peers.
By The Numbers:
Services PMI hit a record 65.6 from 60.5 in July, powered by new orders.
Manufacturing PMI rose to 59.8 from 59.1 in July, its highest since 2008.
Export orders grew at the fastest pace since 2014.
The Bottom Line: Strong demand and pricing power are fueling optimism — and inflation risks.
FROM THE PERIPHERY
GST Rationalisation Push
The Group of Ministers (GoM) on GST has backed the Centre’s plan to shift to a simpler two-slab system of 5% and 18%, scrapping the current 12% and 28% rates. Bihar Deputy CM Samrat Choudhary said this is the first step towards 'next-generation GST' reforms announced by Prime Minister Narendra Modi.
Fast Facts: The GoM also backed raising the maximum levy to 40% to keep taxes on luxury and sin goods unchanged, Moneycontrol reported.
Flashpoint: While states like Uttar Pradesh welcomed the move, West Bengal and others flagged revenue loss concerns and sought compensation, noting some items may still attract the 40% rate or higher.
Both Houses Pass Bill Banning Online Gaming
The Rajya Sabha passed ‘The Promotion and Regulation of Online Gaming Bill 2025’ in 25 minutes, amid disruptions. IT Minister Ashwini Vaishnaw said the bill seeks to protect youth and the middle class from risks such as addiction, money laundering and terror financing, and compared gaming to drug abuse. The House rejected a motion to send the bill to a select committee and adopted clauses and amendments through voice votes, with limited debate.
Fast Facts: The bill bans all online gaming, skill and chance-based. Operators face up to three years in jail or a fine of Rs 1 crore; advertisers up to two years or Rs 50 lakh; banks face similar penalties. Players aren’t punished, as the law treats them as victims.
Flashpoint:Congress leaders Karti Chidambaram, Shashi Tharoor, and Priyank Kharge, along with industry bodies, opposed the bill. They argue it threatens Rs 20,000 crore in tax revenue, endangers six billion dollars in foreign investment, and wipes out jobs. They call for regulation and taxation instead of prohibition, warning that an outright ban will push players toward unsafe, offshore gambling platforms.
What’s India Buying?
India’s strongest consumer segment, the ‘Urban Middle’ spent Rs 205k crore on FMCG products, contributing to 31% of total value spent in 2024, according to Worldpanel by Numeratorf. The report divided consumers into four categories — the largest among them is ‘Rural India’, that’s 65% of households with an FMCG value of Rs 338k crore. After that is the ‘Urban Middle’ category, which is 20%; the ‘Masses’ come third, at 12% of households. The ‘Affluent Class’ is the smallest, at 3% of households and an FMCG value of Rs 36,000 crore.
Origin: The report found that the ‘Affluent Class’ consists of planned buyers, who like premium products even for essentials. The ‘Masses’ are value-seekers who are cautiously adopting ready-to-cook mixes and health biscuits. Finally, in ‘Rural India’, small packs dominate. This category is moving toward noodles, ketchup, sanitary products, and western snacks.
Fast Facts: In its report featuring India’s most popular brands of 2024, Worldpanel by Numerator ranked Parle, Britannia, Amul, Clinic Plus and Surf Excel as the top five in-home brands, with Haldiram entering the top 10. Balaji and Everest expanded through rural reach and small packs, while Nandini and Aavin gained through higher purchase frequency. Godrej No.1, Lay’s and Arokya crossed one billion consumer reach points, which measures how many times consumers chose a brand over a period of time.
SEBI to Extend Contracts of Equity Derivatives
Markets regulator, the Securities and Exchange Board of India (SEBI), is looking into improving the tenure and maturity of equity derivatives, said chief Tuhin Kanta Pandey at the FICCI Capital Market Conference 2025 on Thursday.
Catch Up Quick: He added that SEBI already took steps to slow speculative trading in equity derivatives. Previously, it reduced contract expiry frequency and raised lot sizes, making high-risk bets more expensive.
PODCASTS
Worried About E20? What It Means for Your Car and the Climate
India is an energy-insecure country. Last year, the country imported 87.7% of the crude oil it consumed. To change that, the government introduced blended petrol in 2018. At first, it was petrol with 10% ethanol. By the end of 2025, the government will roll out E20 across the nation. The government wants to eventually keep increasing the percentage of ethanol in fuel – in a recent press conference, Petroleum Minister Hardeep Singh Puri said that India will gradually scale toward E25, E27 and even E30 fuel.
But, auto-owners say they feel shortchanged. They’ve noticed that their vehicles are giving them a lower mileage since the government introduced blended petrol. They’re also worried about ethanol corroding the insides of their bikes and cars.
In the latest episode of The Signal Daily, we’ll hear from Indian consumers as well as automotive and biofuel experts. Why are consumers upset at this policy? What do they want instead?
The Markets Rise For The 6th Straight Day
On Episode 660 of The Core Report, financial journalist Govindraj Ethiraj talks to K Ramakrishnan, Managing Director - South Asia at Worldpanel by Numerator as well as Ashok Malik, Partner at The Asia Group, and former Policy Advisor, MEA.
The markets rise for the 6th straight day
India is largest underweight market in emerging market investor holdings: Nomura
How India’s rural consumer is buying differently and aspirationally. Exclusive insights from Kantar Worldpanel study
Parle is India’s most chosen in-home FMCG brand, Surf Excel enters top 5
India-US relations have endured long term damage even at this point, will it ever recover
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