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Informist, Wednesday, Sept. 3, 2025

 

--PRESS: CEA: US tariff to impact FY27 growth also if it is not short-lived 
--CONTEXT: CEA Nageswaran's comments in conversation with The Indian Express 
--PRESS: CEA: Need to 1st manage US' penal tariff, then talk reciprocal duty 

 

NEW DELHI – The 50% extra tariff imposed by the US on Indian goods is likely to hurt the country's GDP growth in the current fiscal year by 0.3-0.5%, according to Chief Economic Adviser to the Government V. Anantha Nageswaran. The economist had in February projected an economic growth of 6.3-6.8% for 2025-26 (Apr-Mar).

 

The impact of the US tariffs would show in India's GDP growth prints for the upcoming quarters, Nageswaran said in a conversation with The Indian Express. In the first quarter of the fiscal year, the economy expanded by 7.8%, according to the statistics ministry's estimate. 

 

The 50% extra tariff by the US includes a 25% reciprocal duty and another 25% penal tariff for India's crude oil imports from Russia. Nageswaran believes that the government needs to first resolve the 25% penal tariff, which he is also hopeful of, and then continue the discussions to lower the reciprocal tariff. "From more aggressive signals, we are getting slightly more mixed signals (from the US) in the last few days," CEA said.

 

Indian companies were prepared to handle the reciprocal tariffs as other competitors in southeast Asia were also subject to 19% tariffs, Nageswaran said. "The remaining 6% could have been managed, but the second 25% (penal tariffs) makes life very difficult." 

 

Nageswaran is hopeful that the US' extra tariff will be short-lived, but if it is otherwise, the impact may have a spillover effect on the GDP growth of FY27, Nageswaran said. "But I do feel that it will be more short-lived than long-lived."

 

Around 55% of India's exports to the US are now subject to a 50% tariff, with the White House exempting pharma, energy, and electronics from the additional tariffs. The extra duty poses a risk to nearly $50 billion worth of Indian goods to the US from labour-intensive sectors such as chemicals and fertilisers, textile and apparel, gem and jewellery, shrimp and seafood, furniture and beddings, and machinery and mechanical appliances, among others. In FY25, India exported $86.51 billion worth of goods to the US and had a trade surplus of $40.82 billion. 

 

To mitigate the impact of the US tariff, the government may design intervention programmes and relief measures for the exporters, CEA said. "With the advancement of digital public infrastructure, we do have data, and we can get down to the enterprise level that will be affected by the US tariff. So you can design an intervention programme that gives them more time in terms of working capital, in terms of cash flows."   End

 

US$1 = INR 88.07

 

Compiled by Krity Ambey

Filed by Akul Nishant Akhoury

 

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