India’s gross domestic product (GDP) growth may endure a 30-60 basis points hit this fiscal year as the US government’s move to levy reciprocal tariffs on around 60 countries is likely to weigh on economies worldwide and fuel a global economic slowdown, economists said.
While exports are expected to bear the highest impact, economists believe shifting global supply chains, and India’s comparatively lower tariffs may create opportunities in certain sectors. India’s lower dependence on exports is also likely to partly shield it from the effects of the higher tariffs unlike many other Asian countries including China.
India has been slapped with a 27% tariff, lower than China (34%), Taiwan (32%), Bangladesh (37%), Vietnam (46%), and Thailand (37%).
“The impact on exports based on loss and price competitiveness is estimated to be around 30-40 basis points. The global slowdown resulting from tariffs imposed on other nations could further impact growth,” said Sakshi Gupta, principal economist at HDFC Bank.
These projections are subject to change depending on trade negotiations between India and the US, as well as the rest of the world and the US.
Despite the immediate challenges, the tariff imposition could also present opportunities for India, according to Gupta.
Higher tariffs on other countries may allow India to expand its market share, especially in sectors like textiles and electronics, she said.
“With supply chain shifts, our exports to some countries may rise,” said Gupta.
According to an ET poll, India’s GDP is expected to grow by 6.6% in FY26. Economists anticipate a boost in domestic demand, driven by income tax relief and lower inflation this year.
“The impact on GDP won’t be strong, as India’s economy is primarily fuelled by domestic demand. This contrasts with East Asian nations, including China, where a significant portion of growth is export-driven,” said Madan Sabnavis, chief economist at Bank of Baroda.
In 2024, the US recorded a trade deficit of $37.8 billion with India, according to data from the ministry of commerce and industry.
“The impact of tariffs on global growth will be more pronounced this time compared to their imposition during Trump’s first term, when they were more targeted,” said Gaura Sengupta, chief economist at IDFC First Bank.
Sengupta added that the broader global economic slowdown is likely to have a more substantial effect on India’s growth.
While exports are expected to bear the highest impact, economists believe shifting global supply chains, and India’s comparatively lower tariffs may create opportunities in certain sectors. India’s lower dependence on exports is also likely to partly shield it from the effects of the higher tariffs unlike many other Asian countries including China.
India has been slapped with a 27% tariff, lower than China (34%), Taiwan (32%), Bangladesh (37%), Vietnam (46%), and Thailand (37%).
“The impact on exports based on loss and price competitiveness is estimated to be around 30-40 basis points. The global slowdown resulting from tariffs imposed on other nations could further impact growth,” said Sakshi Gupta, principal economist at HDFC Bank.
These projections are subject to change depending on trade negotiations between India and the US, as well as the rest of the world and the US.
Despite the immediate challenges, the tariff imposition could also present opportunities for India, according to Gupta.
Higher tariffs on other countries may allow India to expand its market share, especially in sectors like textiles and electronics, she said.
“With supply chain shifts, our exports to some countries may rise,” said Gupta.
According to an ET poll, India’s GDP is expected to grow by 6.6% in FY26. Economists anticipate a boost in domestic demand, driven by income tax relief and lower inflation this year.
“The impact on GDP won’t be strong, as India’s economy is primarily fuelled by domestic demand. This contrasts with East Asian nations, including China, where a significant portion of growth is export-driven,” said Madan Sabnavis, chief economist at Bank of Baroda.
In 2024, the US recorded a trade deficit of $37.8 billion with India, according to data from the ministry of commerce and industry.
“The impact of tariffs on global growth will be more pronounced this time compared to their imposition during Trump’s first term, when they were more targeted,” said Gaura Sengupta, chief economist at IDFC First Bank.
Sengupta added that the broader global economic slowdown is likely to have a more substantial effect on India’s growth.
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