Trump’s tariffs could trim India’s GDP by 0.6%, says CEA

India’s Chief Economic Adviser (CEA) V. Anantha Nageswaran has urged that US President Donald Trump’s decision to impose 50% tariffs on Indian goods could reduce the country’s gross domestic product (GDP) by as much as 0.6% this year.“I hope the additional penal tariff is a short-lived phenomenon,” Nageswaran said in an interview on Monday. “Depending upon how long it lasts even in this financial year, it may translate into a GDP impact of somewhere between 0.5% to 0.6%.”
He urged that if the tariff uncertainty continues into the next fiscal year, the economic impact will be “larger,” posing a significant “risk” to India’s growth momentum.Trump doubled tariffs on Indian exports to 50% last month, citing India’s continued purchases of Russian oil. The punitive duties are now the highest in Asia, eroding the competitiveness of Indian goods against rivals such as Vietnam and Bangladesh. Labor-intensive sectors including textiles, gems, and jewelry are expected to bear the brunt of the measures.Despite the tariff shock, Nageswaran reaffirmed the government’s growth forecast of 6.3%–6.8% for the fiscal year ending March 2026. He cited the strong April–June quarter, when India’s economy expanded 7.8%, its fastest pace in over a year.
The CEA also highlighted supportive domestic factors that could soften the blow from US trade actions. “Recent cuts in consumption and direct taxes, coupled with inflation at an eight-year low, are key tailwinds for the economy as they will boost disposable incomes and spending,” he reportedly noted.Last week, India reduced Goods and Services Tax (GST) on a wide range of essential goods to spur consumer demand. According to Nageswaran, the tax overhaul could add 0.2%–0.3% to GDP growth.On the fiscal front, Nageswaran said India remains on track to achieve its deficit target of 4.4% this year, supported by a record central bank dividend transfer and proceeds from asset sales. These, he added, will help cushion any potential revenue shortfall. 

(Business Correspondent)