India expects consumption tax cuts announced by Prime Minister Narendra Modi will give a boost to the economy without hurting the government’s fiscal deficit, helping to offset the fallout from higher US tariffs.

During his Friday speech, Modi also hinted India would continue its unilateral suspension of the Indus Water Treaty. The treaty, which India suspended after the April massacre, allows sharing of the Indus River that runs about 2,897 kilometers (1,800 miles) through South Asia and is a lifeline for both countries.

According to sources, Modi asserted, "Nehru partitioned the country once, and then again. Under the Indus Waters Treaty, 80 per cent of the water was given to Pakistan. Later, through his secretary, Nehru admitted his mistake, saying that it brought no benefit."

Prime Minister Narendra Modi has proposed India's biggest tax reform in eight years to lower consumption levies on everyday goods and small cars from October, in a move seen as boosting his his image amid trade tension with Washington.