NEW DELHI, India: India is moving to shore up domestic demand and soften the blow from steep new U.S. tariffs by cutting taxes on hundreds of consumer goods, from small cars to air conditioners, Finance Minister Nirmala Sitharaman announced on September 3.

The changes, approved by a government panel, will take effect September 22, aligning with the start of India’s festive season and running into Diwali in October. The overhaul simplifies the country’s goods and services tax (GST) system, trimming it from four tiers — five percent, 12 percent, 18 percent, and 28 percent — to just two main rates of five percent and 18 percent.

Most items will now attract lower duties, though luxury cars, tobacco, and cigarettes will face a new 40 percent rate. The Finance Ministry said that life and health insurance purchases would be entirely exempt.

Prime Minister Narendra Modi framed the tax cut as part of a broader strategy to insulate the economy from President Donald Trump’s tariffs, which threaten nearly US$50 billion of Indian exports. “The wide-ranging reforms will improve the lives of our citizens and ensure ease of doing business for all, especially small traders and businesses,” Modi wrote on social media.

The measures come weeks after Trump doubled tariffs on Indian goods to 50 percent, targeting products such as garments, chemicals, and jewelry. The U.S. move, triggered by India’s continued imports of Russian oil, has strained relations between the world’s two largest democracies.

Officials and exporters warn that the new duties could make U.S.-bound shipments commercially unviable, threatening jobs and slowing India’s economic growth. To counter this, New Delhi is also accelerating efforts to diversify trade ties beyond the American market.

Talks with the European Union over a long-pending trade agreement have taken on renewed urgency, while India is also pursuing new opportunities in Latin America, Africa, and Southeast Asia. Officials said financial incentives, including favorable bank loan rates, are being discussed to support exporters through the transition.

The government hopes the twin strategy — boosting local consumption while widening overseas markets — will help India weather the latest round of tariff pressures.