US tariffs threaten to shave 0.5% off India’s FY26 GDP, warns Chief Economic Adviser V. Anantha Nageswaran
New Delhi
India’s Chief Economic Adviser V. Anantha Nageswaran has cautioned that steep tariffs recently imposed by the United States could trim India’s GDP growth by about 0.5–0.6 percent in FY26. Effective from August 27, Washington levied a combined 50 percent duty on key Indian exports—25 percent as a secondary tariff and an additional 25 percent penalty tied to India’s continued Russian crude imports.
The CEA noted that nearly 55 percent of India’s $87 billion exports to the US—covering textiles, carpets, auto components, marine goods, furniture, and steel—will feel the brunt, with micro, small, and medium enterprises particularly vulnerable. The policy shift aligns with the Trump administration’s trade stance and threatens India’s competitiveness in its largest export market.
Despite these headwinds, Nageswaran retained the FY26 growth outlook at 6.3–6.8 percent, citing resilient domestic demand and the April–June GDP expansion of 7.8 percent. He warned, however, that the sharpest effects of the tariffs would surface in the second and third quarters.
Nageswaran voiced hope that the US duties may prove temporary and that upcoming trade negotiations could soften their impact. Meanwhile, India faces intensified competition from exporters such as Vietnam, Bangladesh, and China, which may gain US market share.
To cushion the blow, the government is exploring policy adjustments, including Goods and Services Tax reforms aimed at improving cost efficiency. Such steps, Nageswaran suggested, could add 0.2–0.3 percent to GDP and strengthen India’s export competitiveness over the medium term.