Sovrenn Times: Macroeconomy Update | 04 Sep 2025
India Eyes Decisive EU FTA as Germany Pledges Full Support; Deal Could Boost Trade by $50–60Bn
External affairs minister S. Jaishankar said India wants negotiations with the EU for a free trade agreement to reach a "decisive conclusion soon", after talks with German foreign minister Johann Wadephul. The EU is India’s 3rd largest trading partner, with bilateral trade at $155 Bn in FY24, while Germany alone accounts for over $27 Bn. An FTA could lift India’s exports of textiles, pharma, IT services, and agri goods, while easing tariffs on European auto, machinery, and chemicals — potentially adding $50–60 Bn to trade flows over the next 5 years, according to industry estimates. Germany has pledged to double its trade with India, calling New Delhi a key partner amid shifting supply chains. Defence and tech also featured, with both sides agreeing to expand joint drills like Tarang Shakti and naval visits, and Germany praising India’s role as host of the next global AI Summit. Wadephul also urged India to use its influence with Russia to push for Ukraine peace talks, underlining the geopolitical backdrop to trade diplomacy.
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India’s Biggest GST Overhaul: 400 Items Get Cheaper, 2-Slab Structure to Boost GDP by 20–30 bps
The GST Council has approved the largest reform since GST’s launch in 2017, cutting slabs to 5% and 18% while introducing a 40% rate on sin & luxury goods. From September 22, over 400 items of daily use including food, toiletries, cement, small cars, and medicines will get cheaper, while insurance premiums move to 0% GST. The revamp, expected to cost ₹48,000 Cr in revenue, is projected to lift GDP growth by 20–30 basis points and spur festive demand. Domestic GST rose 9.6% YoY in August, showing strong consumption momentum, while economists expect rationalisation to offset the drag from US tariffs. Process reforms include 3-day GST registration, 7-day refunds for exporters, and automatic registration for small taxpayers. Together, the reforms mark a shift toward simplicity, consumer relief, and higher economic efficiency, Finance Minister Nirmala Sitharaman said.
FDI Inflows Jump 15% to $18.6 Bn in Q1 FY26; US Tops with $5.6 Bn, Software Leads
India’s FDI inflows rose 15% YoY to $18.62 Bn in April–June FY26, with the US tripling investments to $5.61 Bn, overtaking Singapore and Mauritius as top sources, DPIIT data showed. Total FDI, including reinvested earnings and other capital, hit $25.2 Bn, up from $22.5 Bn last year. The software & hardware sector attracted $5.46 Bn, followed by services at $3.28 Bn. Karnataka emerged as the largest FDI hub, followed by Maharashtra. The rebound comes after inflows had slipped 24.5% in Q4 FY25 to $9.34 Bn.
India, Germany Address Visa & Trade Barriers; Aim to Double $29.1 Bn Goods Trade
India raised concerns over migration, mobility, visa delays, and non-tariff barriers faced by exporters in the EU, including Germany, during talks between Commerce Minister Piyush Goyal and German Foreign Minister Johann Wadephul. Both sides agreed to work jointly to resolve these issues and smoothen trade flows. Bilateral goods trade stood at $29.12 Bn in FY25, with a shared goal to double this figure in coming years. Discussions also spanned cooperation in innovation, sustainability, and technology. The long-pending India–EU FTA was also reviewed as a key driver to deepen economic ties.
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Govt to Procure Cotton at MSP via 550 Centres; Digital ‘Kapas-Kisaan’ App to Streamline Payments
Union Textiles Minister Giriraj Singh reviewed preparedness for MSP operations for cotton procurement in Kharif Marketing Season 2025-26, starting October 1. The government assured that all eligible kapas will be procured, with Aadhaar-based farmer self-registration and 7-day slot booking enabled via the new Kapas-Kisaan mobile app. Payments will be made directly to farmers’ bank accounts through Aadhaar-linked NACH, with SMS alerts continuing. A record 550 procurement centres have been set up across major cotton-growing states, with uniform norms for APMC-linked centres. Procurement begins Oct 1 in Northern states, Oct 15 in Central, and Oct 21 in Southern states. Local monitoring committees, helplines, and grievance redressal systems will ensure transparency and farmer support.