The Indian Rupee (INR) declines against the US Dollar (USD) on Wednesday. The USDINR pair rises to near 88.30 ahead of the two-day Goods and Services Tax (GST) council meeting on Wednesday, aiming to revise tax slabs from four to two.
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On the eve of independence on August 15, Indian Prime Minister Narendra Modi announced that the government will reveal new GST slabs to boost consumption around Deepawali, which will be celebrated on October 21.
According to a report from The Indian Express, the centre will abolish 12% and 28% slabs, and will shift these items into the remaining 5% and 18% tax brackets. Such a scenario will be inflationary for the Indian economy and may restrict the Reserve Bank of India (RBI) from reducing interest rates in the near term.
Meanwhile, India’s Trade Minister Piyush Goyal has expressed confidence, in his speech at an industry chamber event on Tuesday, that New Delhi will close a tariff deal with the United States (US). “We are in dialogue with the US for a bilateral trade deal,” Goyal said, The Economic Times reported. Goyal added that India is getting new trading arrangements with countries such as the European Union (EU), Chile, Peru, New Zealand, Australia, Oman and has already concluded deals with the EFTA bloc, UK, and UAE.
A slightly positive commentary from Indian Commerce Minister Goyal on trade deal with the US has come at a time when President Donald Trump has been criticizing New Delhi for doing “one-sided business” with Washington for a long time.
On Tuesday, US President Trump criticized India again while addressing reporters at the Oval Office. “We get along with India very well, but for many years, it was a one-sided relationship. India was charging us tremendous tariffs, the highest in the world,” Trump said, Hindustan Times reported.
Domestically, final HSBC Composite Purchasing Managers’ Index (PMI) data for August has come in weaker than preliminary estimates. The Composte PMI dropped to 63.2 from the prior estimates of 65.2.
- 1 Technical Analysis: USDINR holds key 20-day EMA
- 2 FAQs
- 2.1 Q1. What GST changes did Prime Minister Narendra Modi announce on August 15?
- 2.2 Q2. How could the new GST slabs impact the Indian economy?
- 2.3 Q3. What progress has India made on trade deals with the US and other countries?
- 2.4 Q4. What is the latest update on US President Donald Trump’s stance toward India?
- 2.5 Q5. What are the key technical levels for USD/INR right now?
Technical Analysis: USDINR holds key 20-day EMA
The USD/INR pair broadly turns sideways after posting a fresh all-time high of around 88.50 on Monday. The near-term trend of the pair remains bullish as it holds above the 20-day Exponential Moving Average (EMA), which trades near 87.69.
The 14-day Relative Strength Index (RSI) stabilizes above 60.00, suggesting that a fresh bullish momentum has come into effect.
Looking down, the 20-day will act as key support for the major. On the upside, the pair has entered uncharted territory. The round figure of 89.00 would be the key hurdle for the pair.
FAQs
Q1. What GST changes did Prime Minister Narendra Modi announce on August 15?
A1. PM Modi announced that the government will abolish the 12% and 28% GST slabs and shift items into the 5% and 18% brackets, with the changes expected to boost consumption around Deepawali.
Q2. How could the new GST slabs impact the Indian economy?
A2. While the move aims to boost spending, experts believe it could be inflationary and may restrict the Reserve Bank of India (RBI) from cutting interest rates in the near term.
Q3. What progress has India made on trade deals with the US and other countries?
A3. Trade Minister Piyush Goyal stated that India is in talks with the US for a bilateral deal and has already concluded agreements with the EFTA bloc, UK, and UAE, while working on new arrangements with the EU, Chile, Peru, New Zealand, Australia, and Oman.
Q4. What is the latest update on US President Donald Trump’s stance toward India?
A4. President Trump criticized India for maintaining “one-sided” trade practices and imposing “tremendous tariffs,” though he emphasized that the US and India still have a good relationship.
Q5. What are the key technical levels for USD/INR right now?
A5. The USD/INR pair remains bullish above the 20-day EMA at 87.69, with the next major hurdle at the 89.00 level. The RSI above 60 also signals continued bullish momentum.