The tariffs introduced on Thursday will take impact in 21 days. Analysts say the transfer may push Indian items out of competitors within the US market, which is India's largest export vacation spot. Bloomberg Economics estimates the hike may scale back India's outbound shipments to the US by as much as 60%, probably shaving off about 1% from GDP. The Reserve Financial institution of India has forecast the financial system to develop at 6.5% in fiscal 2026 — the identical tempo as final yr, however effectively beneath the 8% common progress India noticed in earlier years.
“The general hit to GDP could possibly be even larger at 1.1% over the medium time period” as soon as tariffs on sectors resembling prescription drugs and electronics are introduced, wrote Chetna Kumar and Adam Farrar of Bloomberg Economics.
The toughest hit are anticipated to be labour-intensive sectors resembling textiles, footwear, gems and jewelry. Analysts warn that many companies in these industries may see exports to the US come to a halt, forcing India to urgently search various markets.
New Delhi has reacted strongly to the announcement. Calling the US transfer “unfair, unjustified,” the Indian authorities criticised Trump for concentrating on India whereas different nations additionally proceed shopping for oil from Russia.
Sonal Badhan, an Economics Specialist at Financial institution of Baroda, advised ANI, “We had initially priced in approx. 0.2 per cent impression (on GDP progress) of 25-26 per cent tariffs imposed by the US on imports from India. The extra 25 per cent hike will come into impact after 21 days. Throughout this time or within the coming months, there's a chance that decrease charges could also be negotiated.”Additionally Learn: Trump's extra 25% tariffs might dent India's FY26 progress by 0.4%
She added that the ultimate impression on GDP progress would rely on the commerce settlement that emerges. “The overall impression of those tariffs on GDP progress might vary between 0.2-0.4 per cent,” she mentioned, including that the clothes, treasured stones, electronics, pharma, auto elements, and MSME sectors are prone to be hit. “There seems to be draw back danger to our progress forecast of 6.4-6.6 per cent if decrease charges usually are not negotiated,” she mentioned.
Exporters and commerce consultants are additionally alarmed. Ajay Srivastava, founding father of the International Commerce Analysis Initiative (GTRI), mentioned the excessive tariffs may make Indian items considerably costlier and scale back exports to the US by as a lot as 40–50%.
A report by Morgan Stanley warned that until offset by decisive authorities insurance policies and reforms, the transfer may shave off as a lot as 80 foundation factors from India's GDP progress over the subsequent 12 months. In response to the report, a full-scale tariff of fifty% on all Indian exports would have a direct impression of 60 foundation factors on progress, whereas oblique results may push the whole loss to 1.2 share factors. If solely 67% of products are topic to the complete tariff, the mixed direct and oblique impression would nonetheless be round 80 foundation factors.
Additionally Learn: India braces for a progress hit with US tariffs going as much as 50%
The overseas financial institution expects Indian policymakers to reply if tariffs keep excessive for a yr. The Reserve Financial institution of India may minimize rates of interest by as much as 75 foundation factors — together with 50 bps greater than at present deliberate — to assist home demand. RBI had left charges unchanged on August 6. The federal government may also ease up on fiscal consolidation and lift public funding to offset export losses, Morgan Stanley mentioned.
Economists Sonal Varma and Aurodeep Nandi at Nomura Holdings described the 50% tariff as just like “a commerce embargo,” warning that it might trigger “a sudden cease in affected export merchandise.” They mentioned that many small and medium enterprises might battle to outlive, given their low margins and restricted worth addition.
The US at present accounts for practically 20% of India's whole exports. Citigroup's Samiran Chakraborty warned that with the tariffs, exports may turn into “economically unviable” and mentioned that utilizing a easy estimate may understate the precise harm. Chakraborty additionally mentioned the transfer may hit each present and capital account flows. With the rupee already close to its report low, the RBI might should step in to stop a pointy fall, he mentioned. Citigroup expects a 0.6-0.8 share level draw back danger to GDP progress from the tariff hike.
Indian officers, nonetheless, seem much less fearful. Dammu Ravi, Secretary for Financial Relations on the Ministry of Exterior Affairs, mentioned India will discover new export markets if the US turns into “tough to export.” He talked about South Asia, Africa and Latin America as potential locations. “It's very pure for international locations to search for alternate options if you find yourself affected by a wall of tariffs in any a part of the world,” he mentioned.
Nonetheless, analysts say that if the excessive tariffs proceed, coverage assist will likely be essential from each the federal government and the Reserve Financial institution of India to maintain progress on observe.
