How Have India's Domestic Consumption and GST Reforms Mitigated US Tariff Effects?
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Synopsis
Discover how India's strong domestic fundamentals and GST reforms have shielded the economy from US tariffs. This insightful report reveals the resilience of India's equity markets in the face of external challenges, highlighting significant growth amidst tariff uncertainties.
Key Takeaways
- India's domestic fundamentals have helped mitigate the impact of US tariffs.
- GST 2.0 reforms are crucial for equity market growth.
- Sensex grew by $66.5 billion in 2025 despite external challenges.
- Domestic mutual fund inflows reached $37.6 billion in five months of FY26.
- Most trade agreement countries reported double-digit growth.
New Delhi, Sep 17 (NationPress) According to a report released on Wednesday, the impact of US tariffs has been significantly mitigated by India's robust domestic fundamentals, strong domestic consumption, and the implementation of GST 2.0 reforms.
The report from Bank of Baroda highlights that the GST reforms and the proactive rate cuts by the RBI are likely to support the growth of India's equity market and provide a buffer against external shocks.
In 2025, the Sensex saw an increase of $66.5 billion in market capitalization, even in the wake of US tariffs on Indian imports. Analysts noted that the markets have already adjusted to tariff uncertainties and are now concentrating on the underlying economic fundamentals.
Interestingly, from January to April, India was one of just four nations—alongside Hong Kong, Brazil, and China—that achieved positive returns following the tariff announcements by US President Trump.
Conversely, US indices like the Dow Jones and S&P 500 experienced losses, erasing $6.1 trillion in market value during this same period.
However, a sharp rebound in global stock markets occurred in mid-2025, largely attributed to a 90-day tariff pause announced in April, as well as trade agreements with the UK, Japan, Indonesia, and Vietnam, along with a temporary truce with China.
Most countries involved in trade agreements, including Hong Kong, China, and Thailand, reported double-digit growth.
The Dow's market capitalization saw an uptick of $2 trillion year-to-date, while the S&P 500 added $4.9 trillion. Additionally, China’s Shanghai Composite rose by $1.6 trillion, and Japan’s Nikkei increased by $756.4 billion.
Christopher Wood, global head of equity strategy at Jefferies, stated on Tuesday that domestic mutual funds have shielded Indian equities from a potential decline of 20-30% this year, despite ongoing sales by foreign portfolio investors (FPI).
August marked the 25th consecutive month of net inflows from domestic investors, with $37.6 billion invested in equities during the first five months of FY26.
Point of View
I believe that India's strong economic fundamentals and strategic reforms play a pivotal role in our resilience against global trade challenges. The ongoing focus on domestic consumption and the positive trajectory of our equity markets underscore the importance of nurturing local growth amidst external uncertainties. We must continue to support policies that bolster our economic stability.
NationPress
20/09/2025
Frequently Asked Questions
What are GST reforms?
GST reforms refer to the Goods and Services Tax reforms aimed at simplifying the taxation process in India, enhancing efficiency, and boosting domestic consumption.
How did US tariffs affect India's economy?
While US tariffs posed a threat, India's strong domestic fundamentals and consumption helped mitigate their impact, allowing for continued equity market growth.
What was the market capitalization growth of Sensex in 2025?
In 2025, Sensex experienced an increase of $66.5 billion in market capitalization despite US tariffs on imports.
Which countries achieved positive returns during the tariff announcements?
India, along with Hong Kong, Brazil, and China, reported positive returns between January and April after the US announced tariffs.
What role did domestic mutual funds play?
Domestic mutual funds have played a crucial role in shielding Indian equities from significant declines amidst foreign portfolio investor sell-offs.
