India Boosts Domestic Demand Amid Steep Tariffs – Asia Law Portal

The high trade tariffs imposed on Indian imports by the United States took centre stage on the economic front. The Government took calculated action to mitigate the negative impact on key industries by intensifying its focus on fostering stronger trade ties with its other partner countries. Simultaneously, the local goods and service tax regime reforms were announced, ushering in cheerfulness as the festive season has just begun and shopping for Diwali, India’s biggest festival, on October 20, will be lighter on the purse of all residents.

Trade Tariffs – Every economic activity in India was dominated by the impact of the trade tariffs imposed by the United States on its imports from India. These steep tariffs became effective in steps. The first levy was on July 31, applying a 25% tax to certain goods. The next additional 25% on certain goods was levied on August 06 and became effective on August 27. Collectively, they have made exports in sectors such as apparel, textiles, gems and jewellery, shrimp, carpets, and furniture key products a costly affair and uncompetitive in comparison to other countries that do not face such massive tariffs. The Government of India had entered into trade negotiations early with the US authorities, and the same was progressing steadily. In a sudden turn of events, a change was visible when the Indian delegation returned empty-handed twice in July. And then came the outcome, which sent shockwaves across the country. The primary reason for this, the import and usage of oil from Russia, seems a weak cause, given that other nations with larger Russian oil imports are not subject to such impositions. As expected, the securities market crash had a cascading effect, with those with US exports being the hardest hit. One of the early reactions was the suspension of postal items above 100g from being sent from India to the US. India is now more actively leaning towards its traditionally strong economic partners like Japan, while reviving ties with some other nations like China. Acrimonious statements from politicians calling for a boycott of US products are slowly rising. There are daily deliberations on the outcome of this imposition.

Online Gaming Ban – Online gaming has gained significant ground in the past few years, thanks to partnerships with various sporting activities, with cricket being the most popular. Endorsements from cricketing events and by cricket players, who are treated like superstars in India, have been a lucrative field to grow and expand. Dream11 has been a regular sponsor for many sporting organisations, including cricket, hockey and kabaddi. It had a long-term contract with the world’s richest sporting body, the Board of Cricket Control in India. All that came to naught when the Government of India enacted the Promotion and Regulation of Online Gaming Act, 2025. The Act received the President’s assent on August 22, 2025 and will be notified soon. The Government cited that online money gaming platforms have caused widespread harm, and the Government has recognised these dangers and responded with strong legislation, which separates constructive digital recreation from betting, gambling and fantasy money games that exploit users with false promises of profit.

GST Overhaul – Several suggestions for changes in goods and service tax slabs and rates have been made since the goods and services tax (GST) regime was introduced in India in 2017—the 56th meeting of the GST Council, chaired by Union Finance Minister Smt. Nirmala Sitharaman has now approved Next-Gen GST reforms with a simplified two-tier structure, fairer taxation, and digital filing for ease and faster refunds. Sweeping changes were introduced, effective September 22, 2025, by overhauling the overall structure to a simplified two-slab structure (5% & 18%), except for tobacco, pan masala, aerated drinks, and luxury goods, which are taxed at 40%. The reforms prioritise consumers by lowering rates on essentials and high-value items, empower MSMEs and manufacturers with smoother cash flows, strengthen state revenues, and boost demand, driving consumption and manufacturing growth across India. This reduction in rates will definitely lead to revenue loss for the Government, though increased local consumption is expected to increase the tax base and somewhat offset the loss.

FPIs Sold More – Foreign portfolio investors (FPIs) were net sellers on 15 out of the 19 trading sessions in August, dumping $3.99 billion (₹34,993 crore) of Indian equities, data from NSDL showed. For the first eight months of a calendar year, this was the biggest cumulative FPI selling at $14.9 billion (₹1.3 lakh crore), next only to the first eight months of 2022, when overseas funds sold $21.4 billion worth of Mumbai-listed risk assets. To be sure, FPI outflows from India’s secondary market have so far been partially offset by $4.7 billion worth of overseas buying in the primary market.

ASEAN-India Trade in Goods Agreement – India hosted the 10th Meeting of the ASEAN–India Trade in Goods Agreement (AITIGA) Joint Committee and related meetings. The Joint Committee focused on advancing the ongoing review of AITIGA to enhance its effectiveness, accessibility, and trade facilitation capabilities—the discussions built on the progress achieved through eight active rounds of negotiations. Seven of the eight Sub-Committees under the AITIGA Joint Committee also met on the margins, namely: The Sub-Committee on Customs Procedures and Trade Facilitation (SC-CPTF), Legal and Institutional Issues (SC-LII), National Treatment and Market Access (SC-NTMA), Sanitary and Phytosanitary (SC-SPS), Rules of Origin (SC-ROO), Standards, Technical Regulations and Conformity Assessment Procedures (SC-STRACAP), and Trade Remedies (SC-TR). These meetings provided a platform for deeper collaboration, ensuring alignment with the broader goals of updating AITIGA. All previous meetings have been covered by Asia Law Portal, with the last update here.

Potential FDI liberalising – The Ministry of Commerce and Industry is working on a 100-day reform agenda, which may include proposals such as further liberalising the FDI regime, easing investments from neighbouring countries, and offering more tax benefits for start-ups.

FDI in Insurance – The Ministry of Finance has issued a notification paving the way for the quick implementation of 100% foreign investment in the insurance sector once it receives parliament approval. As per the notification, the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2025, seek to replace the existing limit of 74% foreign investment with “as stipulated by the Insurance Act, 1938.” “The foreign investment proposals of the Indian insurance company shall be allowed on the automatic route for the paid-up equity capital as stipulated by the Insurance Act, 1938, subject to verification by the Insurance Regulatory and Development Authority of India,” the notification added. This follows the announcement in the Union Budget of 2025 that the foreign direct investment (FDI) limit for the insurance sector will be raised from 74 to 100 per cent, as reported by Asia Law Portal.

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