US-India Trade Tensions Rise as GST Council Overhauls Tax System
The US-India relationship stands at a pivotal juncture, with significant changes in trade policies and economic roles. The GST Council has approved a major overhaul, while President Donald Trump has doubled tariffs on Indian goods. Meanwhile, India's exports face challenges, but its future lies in ideas and innovation.
The GST Council's decision to shift to a two-tier system, with rates of 5% and 18%, alongside a 40% demerit rate for luxury and sin goods, will significantly impact the Indian economy. This comes as President Trump has increased tariffs on Indian goods from 25% to 50%, affecting more than half of India's exports to the USA, particularly in labor-intensive sectors like textiles, gems and jewellery, seafood, and leather goods.
At the US-India Chamber of Commerce Austin's summit, Chintan Vaishnav, former Director of the Atal Innovation Mission at NITI Aayog, delivered a keynote speech that highlighted India's evolving role on the global stage. Vaishnav, who did not participate in the US-India Chamber Summit 2025 in any other capacity, emphasized India's transition from a labor and talent source to an innovation hub. This shift is evident in Texas, where India is among the top 20 trade partners and has a deepening commercial presence. If Texas were a country, it would rank as the eighth-largest economy globally.
In response to these changes, the Finance Ministry is preparing a relief package for exporters. This package will focus on liquidity support and job protection in vulnerable sectors, aiming to mitigate the impact of increased tariffs.
As India's role on the global stage evolves, so too must its trade policies and economic strategies. The GST overhaul and increased tariffs on Indian goods present challenges, but also opportunities for India to solidify its position as a hub of original ideas and innovation. The upcoming relief package for exporters aims to support this transition and protect jobs in vulnerable sectors.
