Indian benchmark shares jumped about 1% on Monday as the government’s plans for sweeping changes to the goods and services tax (GST) regime is expected to boost consumption in an economy where growth is threatened by steep U.S. tariffs.
New Delhi will propose a two-rate structure of 5% and 18%, doing away with the 12% and 28% tax that was imposed on some items, a government official said on Friday, after Prime Minister Narendra Modi announced the reforms.
The Nifty 50 rose 1% - the biggest single-day percentage gain since June 26, 2025 - to 24,876.95 points and the BSE Sensex gained 0.84% to 81,273.75.
However, Indian indexes have underperformed global markets this year, with the Nifty up 5.2%, compared with gains of 17.4% in Asia and 18.3% in emerging markets.
India, world’s fifth largest economy is expected to grow at 6.5% in 2025, according to central bank estimates, but economists have pointed to sluggish urban consumption as wage growth remains modest.
The GST cuts, along with income tax reductions announced in February, could mean policy stimulus of 0.7-0.8% of GDP to households, Citi Research said in a note on Monday.
The lower rates should boost overall demand and fiscal year 2027 earnings outlook, it added.
India’s stock benchmarks set to open higher on easing oil woes, GST reforms
Eleven of the 16 major domestic sectors advanced on Monday.
The reforms include lowering GST on small cars to 18% from the current 28%, while the two-slab system is expected to make a wide range of consumer goods cheaper.
Auto stocks jumped 4.2%, led by India’s top carmaker Maruti Suzuki’s 8.8% gains. Hero MotoCorp , the country’s biggest two-wheeler maker, surged 5.9%.
Consumer stocks jumped 1.2%.
“The GST reform plan should spur consumption and cushion GDP against external tariff risks,” said Narendra Solanki, Narendra Solanki, head of research at Anand Rathi.
“It’s a clear positive for consumption-driven stocks, durables, small cars, and two-wheelers, with ripple gains for consumer financiers and cement makers.”
Lower oil prices also boosted the benchmarks after the U.S. refrained from imposing new measures to curb Russian oil exports, following the meeting between the U.S. and Russian presidents on Friday.
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