Major GST Overhaul to Boost Economy
India is set to implement a major Goods and Services Tax (GST) reform from September 22, 2025, transitioning to a simplified two-slab structure of 5% and 18%. This replaces the earlier four-tier system that included 12% and 28% rates. Finance Minister Nirmala Sitharaman stated that this "GST 2.0" is designed to spur domestic demand, drive economic growth, and ease the financial burden on common citizens, MSMEs, and startups.
The changes will make numerous daily essentials and packaged foods cheaper, with many items either exempted or brought under the 5% category, including hygiene products like hair oil, soap, and toothpaste, as well as food items like milk, paneer, and various Indian breads. Additionally, GST for hotel rooms priced up to Rs 7,500 per night has been reduced to 5%, a move expected to significantly boost the hospitality sector and domestic tourism.
The Finance Minister has emphasized that companies must pass on the benefits of these reduced GST rates to consumers, and the government will closely monitor compliance to ensure the gains reach the common man.
US Tariffs Pose Challenge to Indian Exports
A significant challenge for the Indian economy comes from the new 50% punitive tariffs imposed by the US on a wide range of Indian imports, effective August 27, 2025. These tariffs, reportedly linked to India's continued purchase of Russian oil, are causing considerable disruption, especially for micro, small, and medium-scale enterprises (MSMEs) in the textile, garment, and jewelry sectors in states like Tamil Nadu.
Exporters in apparel hubs like Tiruppur and Karur are already experiencing order cancellations, demands for deep discounts, and concerns over potential job losses. While Union Minister Sarbananda Sonowal stated that the tariffs have had no immediate impact and India is capable of handling geopolitical situations, the Finance Minister acknowledged the adverse effects and confirmed that the government is preparing a relief package for affected exporters. India has also firmly reiterated its stance on continuing to buy Russian oil based on economic considerations.
Positive Economic Indicators Amidst Headwinds
Despite the tariff concerns, India's services sector showed robust growth, with the Services Purchasing Managers' Index (PMI) surging to 62.9 in August 2025, marking the fastest growth in 15 years. This contributed to the composite PMI reaching a 17-year high and reaffirmed India's 7.8% GDP growth in Q1 FY26. India's forex reserves also saw an increase, rising by $3.51 billion to $694.2 billion in the week ending August 29.
However, the Indian rupee has experienced depreciation, plunging to a record low of Rs 88.27 against the US dollar amid tariff fears and foreign fund outflows.
Business and Corporate Updates
Several companies are set to launch their Initial Public Offerings (IPOs) next week, including Urban Company, Dev Accelerator, and Shringar House of Mangalsutra, with subscriptions opening on September 10, 2025. In other corporate news, Tata Motors announced price cuts of up to Rs 1.55 lakh across various models, passing on the benefits of the new GST rates to customers. Dassault Aviation is increasing its stake to take majority control of Dassault Reliance Aerospace.
The Union Textile Minister, Giriraj Singh, highlighted the potential of jute-fibre blends to significantly boost exports and promote new-age fashion, emphasizing the importance of innovation in the jute industry. Additionally, the Niti Aayog has charted a roadmap for self-sufficiency in pulses by 2030 and projects a surplus by 2047.