India’s domestic consumption, GST reforms cushion US tariff impact: Report

September 17, 2025

New Delhi: The potential impact of US tariffs on Indian imports has been cushioned by India’s strong domestic fundamentals, robust consumption, and GST 2.0 reforms, according to a report by Bank of Baroda released on Wednesday.

The report highlighted that front-loaded rate cuts by the RBI and GST reforms are likely to support India’s equity market growth, helping it withstand external shocks.

Market Performance in 2025

Despite tariff concerns, the Sensex added $66.5 billion in market capitalisation during 2025. Analysts noted that markets had already priced in tariff-related uncertainty and are now focusing on underlying economic fundamentals.

India was among the four countries — alongside Hong Kong, Brazil, and China — to post positive returns between January and April, even as global markets faced volatility after US President Trump began announcing tariffs.

Global Market Trends

• From January to April 2025, US indices Dow Jones and S&P 500 shed nearly $6.1 trillion in market value.
• A sharp rebound followed from April to September, driven by a 90-day tariff pause and new US trade agreements with the UK, Japan, Indonesia, and Vietnam, as well as a truce with China.
• Year-to-date, the Dow gained $2 trillion, the S&P 500 added $4.9 trillion, China’s Shanghai Composite rose $1.6 trillion, and Japan’s Nikkei climbed $756.4 billion.

Domestic Flows Shield Indian Equities

According to Christopher Wood, Global Head of Equity Strategy at Jefferies, strong domestic mutual fund inflows helped shield Indian equities from what could have been a 20–30% decline amid persistent selling by foreign portfolio investors (FPIs).

August 2025 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.