GST, tariffs, and market moves: Manishi Raychaudhuri decodes what investors should watch out for

Wed Sep 03 2025

India is preparing for a GST meeting focusing on tax changes and their impact. Experts believe lower GST could boost spending if benefits reach consumers.

As India gears up for a crucial two-day GST meeting, the focus is firmly on the potential impact of tax rationalization on domestic consumption. Market experts say the government's plan to reduce GST slabs—particularly cutting discretionary items from 28% to 18% or even 5%—could provide a meaningful boost to consumer sentiment, but much depends on how much of the relief is passed on to buyers.

“Historically, companies don’t always pass the full benefit of tax cuts to consumers. If a significant portion does reach the end consumer, it would be a considerable stimulus for spending. But states are concerned about potential revenue loss, so the government has to balance these interests carefully,” said Manishi Raychaudhuri in an interview with ET Now.

On the international front, the ongoing uncertainty over U.S. tariffs is keeping Indian manufacturers on edge. With no immediate resolution expected in the next two months, sectors such as textiles, garments, leather, and gems and jewellery will need to brace for impact.

Raychaudhuri told ET Now that targeted incentives, such as lower import duties on intermediate goods or eased borrowing costs, could help these industries weather the storm.

Meanwhile, global bond markets have seen surging yields even as central banks signal easing. “Markets appear to be pricing in future inflation pressures, particularly from tariff-related cost increases, rather than current headline numbers,” Raychaudhuri explained. Investors seem wary that the pre-buying of goods ahead of tariffs could temporarily mask inflation, which may resurface once costs are passed on.

Precious metals, meanwhile, continue to attract investor attention as safe-haven assets. “The safe-haven demand is unlikely to ease anytime soon. Dollar depreciation historically fuels a rise in precious metals, and current conditions suggest this trend will continue in the near term,” Raychaudhuri said. Rising geopolitical and geoeconomic tensions, combined with central banks diversifying away from dollar holdings, have kept gold and silver in favor.

With GST reforms, global trade tensions, and market volatility all intersecting, investors and policymakers alike are navigating a period of heightened uncertainty—where strategic stimulus, tax rationalization, and safe-haven assets will likely play a key role in market stability.

Source: https://economictimes.indiatimes.com/