US President Donald Trump’s 50% tariffs could reduce India’s Gross Domestic Product (GDP) by half a percent this year, the nation’s Chief Economic Adviser V. Anantha Nageswaran said. “I hope the additional penal tariff is a short-lived phenomenon,” Nageswaran told Bloomberg TV’s Haslinda Amin 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 said.
However, if the tariff uncertainty extends into the next fiscal year, the impact will be “larger,” resulting into a major “risk” for India, he said.
Trump upended decades of US diplomacy by slapping 50% tariffs on India in August to "punish" the country for its trade barriers and buying oil from Russia. The US president has accused India of funding Russian President Vladimir Putin’s war on Ukraine through the oil purchases, thereby undermining the US efforts to clinch a peace deal between the two sides. The tariffs are the highest in Asia, making Indian goods uncompetitive compared with manufacturing rivals like Vietnam and Bangladesh. The US is India’s biggest export market, and the tariffs are expected to hurt labor-intensive businesses like textiles and jewellery the most.
The CEA said he will stick to the government’s growth forecast of 6.3-6.8% for the fiscal year ending March 2026, citing strong expansion in the April -June quarter. India’s economy accelerated 7.8% during the period, the fastest pace in more than a year.
He added that the recent cuts in consumption and direct taxes, along with inflation at an eight-year low, are key tailwinds for the economy, as they will boost disposable incomes and spending.
Last week, the central government lowered GST on most items of everyday use in an attempt to spur demand. Nageswaran expects the tax overhaul to boost the GDP by 0.2%-0.3%.
India is expected to meet its fiscal deficit target of 4.4% this year, with a bumper central bank payout and asset sales helping cushion any revenue shortfall, he said.
Trump softens his India rhetoric
Meanwhile, Trump said at the White House on Friday there was “nothing to worry about” with US-India ties and the two countries had a “special relationship.” He called Narendra Modi a “great prime minister” and said he would always be friends with him. PM Modi responded hours later with a post on X, saying he “deeply” appreciated and reciprocated the sentiments.
Officials in New Delhi said they viewed Trump’s comments as positive, but unlike in the past, Modi didn’t refer to the US president as a friend, suggesting the prime minister was proceeding with caution. The officials, who spoke on condition of anonymity with Bloomberg, said Trump’s comments don’t signify a resetting in ties, and they would wait for more reassuring signals from Washington before relations can return to normal.
Officials in New Delhi attribute Trump’s softer tone on India to several factors, including Modi’s meetings with Putin and President Xi Jinping in China last week at a regional security and economic summit. Photos and videos of the event showed the three leaders laughing and holding hands as they chatted, a powerful symbol of shifting economic and political ties. Trump posted on social media on Friday that “we’ve lost India and Russia to deepest, darkest China.”
Despite the positive comments from Trump and Modi, both sides remain far apart in resolving key issues that have led to the impasse. Trump officials like Commerce Secretary Howard Lutnick and Peter Navarro, the president’s trade adviser, have ratcheted up their criticism against India in recent days, while senior ministers in Modi’s cabinet remain defiant.
Lutnick said in an interview on Bloomberg TV last week that it was “ridiculous” that India continued to buy oil from Russia despite the ongoing conflict with Ukraine and that the country needed to pick a side. He predicted India would apologize and join trade negotiations again.
India’s Finance Minister Nirmala Sitharaman said on Friday the country will continue to buy Russian oil in defiance of Trump’s demands. New Delhi will make decisions about energy purchases and costs based on “what suits us best,” she said in an interview with local media.
“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 said.
However, if the tariff uncertainty extends into the next fiscal year, the impact will be “larger,” resulting into a major “risk” for India, he said.
Trump upended decades of US diplomacy by slapping 50% tariffs on India in August to "punish" the country for its trade barriers and buying oil from Russia. The US president has accused India of funding Russian President Vladimir Putin’s war on Ukraine through the oil purchases, thereby undermining the US efforts to clinch a peace deal between the two sides. The tariffs are the highest in Asia, making Indian goods uncompetitive compared with manufacturing rivals like Vietnam and Bangladesh. The US is India’s biggest export market, and the tariffs are expected to hurt labor-intensive businesses like textiles and jewellery the most.
The CEA said he will stick to the government’s growth forecast of 6.3-6.8% for the fiscal year ending March 2026, citing strong expansion in the April -June quarter. India’s economy accelerated 7.8% during the period, the fastest pace in more than a year.
He added that the recent cuts in consumption and direct taxes, along with inflation at an eight-year low, are key tailwinds for the economy, as they will boost disposable incomes and spending.
Last week, the central government lowered GST on most items of everyday use in an attempt to spur demand. Nageswaran expects the tax overhaul to boost the GDP by 0.2%-0.3%.
India is expected to meet its fiscal deficit target of 4.4% this year, with a bumper central bank payout and asset sales helping cushion any revenue shortfall, he said.
Trump softens his India rhetoric
Meanwhile, Trump said at the White House on Friday there was “nothing to worry about” with US-India ties and the two countries had a “special relationship.” He called Narendra Modi a “great prime minister” and said he would always be friends with him. PM Modi responded hours later with a post on X, saying he “deeply” appreciated and reciprocated the sentiments.
Officials in New Delhi said they viewed Trump’s comments as positive, but unlike in the past, Modi didn’t refer to the US president as a friend, suggesting the prime minister was proceeding with caution. The officials, who spoke on condition of anonymity with Bloomberg, said Trump’s comments don’t signify a resetting in ties, and they would wait for more reassuring signals from Washington before relations can return to normal.
Officials in New Delhi attribute Trump’s softer tone on India to several factors, including Modi’s meetings with Putin and President Xi Jinping in China last week at a regional security and economic summit. Photos and videos of the event showed the three leaders laughing and holding hands as they chatted, a powerful symbol of shifting economic and political ties. Trump posted on social media on Friday that “we’ve lost India and Russia to deepest, darkest China.”
Despite the positive comments from Trump and Modi, both sides remain far apart in resolving key issues that have led to the impasse. Trump officials like Commerce Secretary Howard Lutnick and Peter Navarro, the president’s trade adviser, have ratcheted up their criticism against India in recent days, while senior ministers in Modi’s cabinet remain defiant.
Lutnick said in an interview on Bloomberg TV last week that it was “ridiculous” that India continued to buy oil from Russia despite the ongoing conflict with Ukraine and that the country needed to pick a side. He predicted India would apologize and join trade negotiations again.
India’s Finance Minister Nirmala Sitharaman said on Friday the country will continue to buy Russian oil in defiance of Trump’s demands. New Delhi will make decisions about energy purchases and costs based on “what suits us best,” she said in an interview with local media.
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