India’s economy is dealing with some hurdles due to the recently imposed tariffs, but strong local demand, falling commodity prices, and supportive policies might help ease the impact, according to independent economist and Monetary Policy Committee (MPC) member Saugata Bhattacharya.
Speaking to ET Now, Bhattacharya warned that if the 50 per cent tariff stays through FY26, it could negatively affect growth both directly and indirectly. “It is not just exports that will be hit, but also related sectors. MSMEs in textiles and leather, as well as affordable housing, may face pressure. The impact could be relatively strong,” he said.
At the same time, he highlighted some positives. Low global commodity prices are likely to keep inflation under control, while the recent 100-basis-point cut in repo rate and liquidity support from the RBI have helped reduce borrowing costs. Proposed GST rate cuts could further support consumption. “These tailwinds can offset part of the tariff shock, so the eventual hit to GDP may not be as severe as initial estimates suggest,” he explained.
Nearly half of $100-bn exports to US to be hit by new tariffs
Coming to risks, Bhattacharya flagged the loss of access to the US, a key export market. India exported goods worth over $100 billion to the US last year, and nearly half of this could be affected by the new tariffs. “These are low-margin businesses, so even a small disruption can have a big impact,” he noted.Looking ahead, Bhattacharya said free trade agreements (FTAs) with partners such as EFTA, the UK and potentially the EU could open up new opportunities for exporters and reduce dependence on the US market.
Regarding private investment, he acknowledged that uncertainty about demand, especially in the metals and related sectors, might postpone new projects. “Domestic investors may adopt a wait-and-watch approach. But some sectors like petrochemicals, renewable energy, and specialty chemicals are still pushing ahead with new investments,” he said.
Overall, Bhattacharya stressed that while tariffs pose a serious challenge, India’s economy still has buffers in place that could keep growth on track.
