US Tariffs May Shave Off Up To 0.5% From India’s GDP, Says Finance Secretary

Finance Secretary Ajay Seth stated on Wednesday that US tariffs could directly shave 0.2 to 0.5 percentage points off India’s GDP growth. He added that the broader, second-order impact stemming from a potential slowdown in global growth would also be significant.

Seth expressed optimism that the Indian economy would grow around 6.5 per cent this fiscal year, in line with the Reserve Bank of India’s revised forecast in April, which was lowered from 6.7 per cent. The US’s shifting tariff policies, already a source of volatility in global financial markets, are now expected to weigh on worldwide economic growth.

Earlier, members of the Reserve Bank of India’s Monetary Policy Committee noted that the impact of the US-China trade tensions on India’s economy remains uncertain, with no definitive estimates available.

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Global Agencies Trim India’s Growth Outlook Amid Tariff Tensions

Amid rising global trade tensions and uncertainty surrounding US tariff policy, several international agencies have revised down India's growth forecasts for the current fiscal year. Despite the downgrades, India is still expected to remain the fastest-growing major economy, with GDP growth projected between 6.2 per cent and 6.7 per cent.

The International Monetary Fund (IMF) and the World Bank have cut their 2025–26 growth forecasts for India to 6.2 per cent and 6.3 per cent, respectively, citing a turbulent global economic environment and escalating trade conflicts. This marks a downward revision from their January estimates of 6.5 per cent (IMF) and 6.7 per cent (World Bank).

The Reserve Bank of India (RBI) maintains its estimate that the Indian economy will grow at 6.5 per cent in the current fiscal, consistent with its performance in the previous year. However, projections from other global institutions reflect more caution. The Organisation for Economic Co-operation and Development (OECD) in March lowered its growth estimate for India to 6.4 per cent, down from 6.9 per cent. Fitch Ratings echoed this figure, while S&P Global projected growth at 6.5 per cent. Moody’s Analytics offered a more conservative estimate of 6.1 per cent for calendar year 2025.

The Asian Development Bank (ADB), in its April update, also reduced India’s growth outlook to 6.7 per cent, down from an earlier forecast of 7 per cent.

These revisions come against the backdrop of volatile US trade policy. On April 2, US President Donald Trump announced a series of reciprocal tariffs aimed at matching duties imposed by other countries on American exports. After initially pausing the implementation of most new tariffs on April 9, the US sharply raised duties on Chinese goods, first to 145 per cent and then to 245 per cent by mid-April.

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