GST cut, reforms to help even out tariff impact: CII

A reduction in goods and services tax, reforms and lower interest rates will help balance out the impact of the steep 50% American tariffs on India's economy, Confederation of Indian Industry president Rajiv Memani said. In fact, the proposed GST reductions alone should more than offset any impact from the tariffs, he said.

Memani's statements come amid US imposing 50% tariffs on New Delhi effective August 27, which will impact around $48.2 billion of India's goods exports to the US, as well in the backdrop of the country posting a five-quarter-high GDP growth rate of 7.8% for the April-June period.

He said industry is looking at a lower tariff regime and it will have to do more to become competitive and work towards ease of doing business. But, overall, industry has been quite happy about the government's response so far, he said.


"Some sectors that are directly impacted (by the tariffs) are concerned. Most of them are labour-intensive. If I look at the broader industrial group, they are very happy with the way the Indian government has reacted given the circumstances, and also they feel it presents a great opportunity to redo the reforms and prepare ourselves for a stronger India," Memani told ET.

He said relaxations in Press Note 3 can be done with adequate precautions, specifically for those investors who bring in technology and help India become more competitive and build exports.

Under Press Note 3, all foreign direct investments from entities of countries sharing a land border with India require prior government approval.

Next-gen reforms

Memani categorised the reforms required in four buckets: ease of doing business; GST; factor reforms (involving land, labour, capital and energy) to make India more competitive; and sectoral unlocks in electronics, metals, mining, power and manufacturing.

"In GST, what the government has done is far beyond what we were expecting. It's a very significant relief provided, especially in those areas which deal with mass consumption impacting common citizens," Memani said, while also calling for close engagements between states and the Centre.

The benefits of correcting inverted duties can be passed on to the consumer, which would spur consumption and taxes by bringing more people within the ambit of GST, he said.