US President Donald Trump’s 50 per cent tariffs on India could shave off around 0.5 per cent to 0.6 per cent from India’s GDP growth, believes Chief Economic Adviser V. Anantha Nageswaran. The Donald Trump administration had imposed 25 per cent tariffs on India effective August 7, and an additional 25 per cent tariffs for India’s crude oil trade with Russia, which came into effect from August 27.
In a Bloomberg TV interview, V. Anantha Nageswaran discussed the potential economic impact of the United States’ trade measures. He indicated that the 50 per cent tariffs imposed by Trump on Indian goods could negatively affect India’s economic growth.
“Depending upon how long it lasts even in this financial year, it may translate into a GDP impact of somewhere between 0.5 per cent to 0.6 per cent,” he told Bloomberg TV.
India’s GDP is projected to grow at 6.5 per cent in the current financial year, a figure that may take a hit if the tariffs continue. The first quarter GDP data beat estimates, with a five-quarter high GDP growth of 7.8 per cent.
The US tariffs of 50 per cent imposed during Trump’s presidency have affected India’s export competitiveness in American markets, which is significant as the US remains India’s primary trading partner. Industry analysts project these tariffs will affect more than half of Indian exports to America, resulting in substantial financial losses.
However, it’s important to note that India’s economic growth primarily stems from domestic consumption, with exports playing a relatively smaller role in GDP growth.
Experts suggest Trump’s tariff impact could be limited to 30-90 basis points. Additionally, the government’s initiatives to support exporters and new international trade agreements could help businesses find alternative markets beyond the US.
Recently, the Modi government announced broad-based GST rate cuts, benefiting ordinary citizens and the middle class through reduced prices effective September 22, coinciding with Navratras.
These measures, which increase consumer spending power at the beginning of the festive period, are anticipated to stimulate India’s economic growth through enhanced consumption patterns.
