Step 1: Recall the expression for modulation index.
For amplitude modulation,
\[
m=\frac{A_m}{A_c},
\]
where
\[
A_m
\]
is the amplitude of the message signal and
\[
A_c
\]
is the amplitude of the carrier wave.
Step 2: Find the new modulation index.
The message amplitude is increased by \(20\%\), so
\[
A_m'=1.2A_m.
\]
The carrier amplitude is decreased by \(20\%\), so
\[
A_c'=0.8A_c.
\]
Hence,
\[
m'
=
\frac{A_m'}{A_c'}
=
\frac{1.2A_m}{0.8A_c}
=
1.5m.
\]
Step 3: Calculate the percentage increase.
The increase in modulation index is
\[
1.5m-m=0.5m.
\]
Therefore,
\[
\text{Percentage increase}
=
\frac{0.5m}{m}\times100
=
50\%.
\]
Hence,
\[
\boxed{50\%.}
\]
Therefore, the correct option is \(\boxed{(D)}\).