India’s gross domestic product (GDP) is expected to take only a minimal 0.1% hit in the short term due to the United States' recent imposition of reciprocal tariffs, according to the PHD Chamber of Commerce and Industry (PHDCCI).
The industry body has attributed this limited impact to India’s expanding domestic manufacturing sector and the government's strategic policies, particularly under the Aatmanirbhar Bharat initiative.
PHDCCI President Hemant Jain highlighted that India’s industrial strength and supportive government policies, including the Production-Linked Incentive (PLI) schemes, Make in India, and Aatmanirbhar Bharat, will cushion the economy from the adverse effects of the U.S. tariffs.
He asserted that although there may be some short-term effects, the medium-term outlook remains stable, with the economic impact expected to neutralise as these policies take full effect.
Strong Domestic Manufacturing to Offset Impact
Jain pointed out that India's resilient domestic manufacturing sector, reinforced by policies such as Make in India and Aatmanirbhar Bharat, is a crucial factor in maintaining the country's economic stability.
These initiatives aim to enhance self-reliance and reduce dependence on imports, effectively shielding domestic industries from external shocks such as tariff hikes.
The government’s continued support through strategic policy measures, including the PLI schemes, is strengthening India’s industrial base and increasing its competitiveness on the global stage.
“India’s robust industrial competitiveness will balance the impact of the U.S. tariff announcements, and GDP will see only a 0.1% effect in the short term. However, as the full benefits of these policies materialise, this shortfall will be negated,” Jain said.
He further stressed that India’s strong domestic demand will help absorb any potential negative consequences. The country's transition towards greater self-reliance, combined with its expanding consumer market, will mitigate the economic pressure caused by tariff hikes.
Jain noted that key sectors such as electronics, renewable energy, and pharmaceuticals, which are experiencing significant growth due to increasing domestic consumption and export demand, will continue to perform well despite the external challenges.
Aatmanirbhar Bharat and India’s Expanding Trade Relations
The PHDCCI President also highlighted India’s growing price competitiveness and improving product quality, which have positioned it as an attractive market for emerging trade partners.
Countries in regions such as the Middle East, South Africa, Latin America, and parts of Asia are increasingly engaging with India for trade, thereby helping offset potential losses from the U.S. tariffs.
The diversification of India's trade relationships, alongside its strong domestic market, is expected to serve as a buffer against economic disruptions and position the country for sustained long-term growth.
Jain credited initiatives like the Ease of Doing Business reforms and PLI schemes for facilitating India's ability to expand its manufacturing output and attract foreign investments. These reforms have streamlined domestic supply chains, making India a globally competitive manufacturing hub.
Optimism for India-U.S. Trade Relations
Jain expressed confidence in the future of India-U.S. trade relations, especially in light of the ongoing negotiations for a bilateral trade agreement.
He emphasised that both nations would continue to collaborate on economic and trade matters, and a well-structured trade deal could further strengthen their partnership.
“Given India's sustained economic development and strategic global importance, we anticipate continued collaboration with the U.S. through a well-negotiated bilateral trade agreement,” Jain stated.
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