Tariffs' Potential Impact
The specter of US tariffs looms over India's export sector. Reports suggest that as much as $30-35 billion worth of merchandise exports to America are
at risk. Former RBI Governor Urjit Patel stated that tariffs might negatively affect 55% of Indian exports to the US. While the US's actions present challenges, they also offer an opportunity for reforms and deregulation within the Indian economy, according to some experts. The government is already taking steps to mitigate the pain of tariffs, including scrapping duties on cotton imports until September 30, 2025.
GST Restructuring Insights
The Goods and Services Tax (GST) is also in the spotlight, with the GST Council planning a two-day meeting on September 3-4, 2025, to discuss rate rationalisation. The government's plan for GST restructuring has been backed by the Group of Ministers (GoM). This new GST structure, according to various states, could potentially lead to a revenue loss of between Rs 7,000-9,000 crore annually. A key concern is 'profiteering,' with the Finance Ministry set to compile price data on common-use items to monitor any unfair practices. In the new regime, online gaming is likely to be placed in the top tax bracket.
RBI's Monetary Stance
The Reserve Bank of India (RBI) is keeping a watchful eye on the external front amid economic uncertainty. RBI Governor Malhotra emphasized the need for vigilance. Furthermore, the current account deficit for the first quarter stands at $2.4 billion, according to RBI data. The RBI also stated it is ready to support growth and sectors that are significantly impacted by US tariffs. Simultaneously, the credit rating agency, S&P, upgraded India's sovereign rating, noting that the impact of US tariffs appeared manageable, 18 years after the last upgrade.
Retail Inflation Dynamics
India's retail inflation reached an 8-year low of 1.55% in July, the second-lowest figure ever recorded. This indicates a period of relative price stability for consumers. However, this positive trend might be tested by various economic pressures. The interplay between inflation, trade policies, and fiscal measures will define the near-term economic landscape.
Household Disposable Income
Experts anticipate a significant increase in the disposable income of Indian households this year. This rise in disposable income is likely to fuel consumer spending and contribute to economic growth. This positive outlook for household finances is a key driver for the economy. This is also further boosted by a surge in demand for short-form videos, with a Meta study revealing that 97% of Indians watch Reels daily.
