While it’s still unclear what the final verdict will be when it comes to US tariffs on Indian goods, with US President Donald Trump now announcing 50 per cent tariff imposition on exports from India, economists have been playing down the effects of these duties on India’s GDP.
On the sidelines of the Reserve Bank of India’s (RBI) bi-monthly monetary policy meeting, the central bank’s Governor, Sanjay Malhotra, said the Indian economy is “doing very well” and that it is contributing more to global growth than the US.
Malhotra’s comment comes days after Trump's remark on Indian and Russian economies being “dead”.
Also Read: GDP projected to grow at 6.5 pc in current fiscal
Drawing attention to India’s growth rate that is expected to reach 6.5 per cent, as against the International Monetary Fund's (IMF's) estimate of about 3 per cent global growth in 2025, Malhotra told reporters at the central bank headquarters in Mumbai on Wednesday that India’s 18 per cent contribution to the world’s GDP is more than the US, which contributes approximately 11 per cent.
“We are doing very well and we will continue to improve further,” he said.
With the country growing at a yearly average of 7.8 per cent in the recent past, Malhotra said the RBI does not expect US’s tariffs to bear any impact on inflation in India, an opinion shared by the bank’s Deputy Governor Poonam Gupta.
Meanwhile, a study by the PHD Chamber of Commerce and Industry (PHDCCI) deduced there would be “negligible” impact of Trump administration’s tariffs on India’s GDP with only USD 8.1 billion of exports expected to be affected.
The paper, released on Wednesday, had not taken into account the sharp rise in tariffs that Trump announced later in the day.
“Our analysis indicates that there will be an estimated impact of only 1.87 per cent on India’s total global merchandise exports and a negligible 0.19 per cent on India's GDP as a result of a 25 per cent tariff announced by the US on India,” said Hemant Jain, President, PHDCCI.
The study said the total potential export impact is estimated at USD 8.1 billion based on 2024-25 merchandise exports of USD 86.5 billion (1.87 per cent of India’s total global export).
Among other sectors, the study said the levies would impact engineering goods (USD 1.8 billion), gems and jewellery (USD 932 million), and ready-made garments (USD 500 million).
The body also recommended a series of measures to mitigate the impact of the tariffs, including increasing market penetration, product development and market diversification.
It suggested that stakeholders should negotiate bundled-pricing deals (textiles plus accessories) to absorb some tariff cost and maintain shelf-price competitiveness.
“Leverage Indian diaspora networks (trade fairs, cultural events) to boost volume with existing buyers under current product portfolios,” it said.
PHDCCI also made a strong case for investments in joint ventures with US firms to produce tariff-sensitive goods on-shore, thereby converting exports into high-value services and intellectual property (IP) licensing.
The RBI Governor also said that this fiscal year, authorities will step in to ensure that the purchase prices of petroleum prices do not pinch the common man, hinting of a possible cut in duties if the oil becomes dearer.
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