US Tariffs Could Slash 0.5 Per Cent Off India’s GDP Growth Rate In FY26: CEA

India’s Chief Economic Adviser, V Anantha Nageswaran, has warned that the US’s recent high tariffs could significantly slow India’s economic growth in the current fiscal year, reported The New Indian Express.

He said the additional 50 per cent tariffs on Indian goods may reduce GDP growth by roughly 0.5 per cent to 0.6 per cent in FY26.

The tariffs, which came into effect on 27 August, include a 25 per cent secondary tariff and an extra 25 per cent penalty linked to India’s continued imports of Russian crude oil.

Nageswaran noted that the move, under US trade policy, will directly affect nearly 55 per cent of India’s $87 billion exports to the US. Sectors likely to face the strongest impact include textiles, carpets, automobile parts, marine products, furniture, and steel.

Small and medium-sized enterprises (MSMEs), which form a large part of India’s export base, are especially vulnerable.

Despite this, he maintained India’s GDP growth forecast for FY26 at 6.3 per cent–6.8 per cent, citing the economy’s resilience and robust domestic demand.

The CEA cautioned that the tariffs’ full effect would mainly be seen in the second and third quarters. He expressed hope that the punitive measures are temporary and that trade negotiations could lead to a reduction soon.

The tariffs have raised concerns amongst Indian exporters, who feel that it would be difficult to recover market share in the US from countries like Vietnam, Bangladesh, and China, which now enjoy a lesser rate.

Nageswaran added that the recent GST revamp could add 0.2-0.3 per cent to the GDP due to an increase in cost efficiency and competitiveness.

Please click here to add Swarajya as your preferred and trusted news source on Google.

Also Read: US ‘HIRE Act’ Proposes 25 Per Cent Outsourcing Tax, Posing Fresh Challenge To Indian IT Services Sector