High US tariffs may push India’s growth to 5 year low

India’s economic growth could decelerate to around 6% in the current financial year its lowest in five years if the elevated tariffs announced by U.S. President Donald Trump on Indian goods continue through the rest of the year, say economists and brokerage firms.
According to Barclays, India’s GDP growth is likely to decline by 30 basis points due to the tariff hike. Nomura and Elara Capital estimate a 20 basis point drop each. With one percentage point equaling 100 basis points, these projections suggest a meaningful dent in India’s growth outlook. As per the latest data from the National Statistics Office, the Indian economy grew 6.5% in FY 2024-25,its slowest since the pandemic year of 2020-21.
Most economic agencies, including the Reserve Bank of India and the International Monetary Fund, have projected India’s growth to remain in the 6.2%–6.5% range this year. The IMF recently revised its FY 2025-26 forecast upward to 6.4%, while the RBI and Asian Development Bank have both maintained their projection at 6.5%.
According to information from Barclays, the bank expects final tariffs on Indian goods to settle below the announced 25% level as negotiations between New Delhi and Washington continue. “We do not see this 25% tariff threat impacting GDP growth meaningfully, pegging the likely impact at 30 bps,” Barclays stated in a note.
BMI, a unit of Fitch Solutions, said the higher tariffs are expected to hurt growth in both developed and emerging markets. “Our 2025 growth forecasts assumed somewhat lower tariff rates for most countries in our sample compared to those observed as of July 30,” BMI noted. “As a result, the actual drag on growth could be greater than previously anticipated.”
SBI Securities Research highlighted that India’s exports to the U.S. total about $85 billion annually, accounting for roughly 2% of India’s GDP. “Assuming 50% of these exports are affected, the impact may be around $40 billion, or 1% of GDP,” the report said. However, factoring in potential redirection of goods to other markets, the actual impact could be closer to 0.5% of GDP.
Emkay Global estimated that U.S. tariffs could hit India’s exports by $30–33 billion, equivalent to 0.8–0.9% of GDP. “While a trade deal is expected eventually, even countries that have already signed agreements with the U.S. continue to face elevated tariffs despite offering broad concessions,” the firm added.Despite the projected slowdown, India is still expected to remain one of the world’s fastest-growing major economies, with domestic consumption acting as a key growth driver,noted experts.

(Business Correspondent)