US Tariffs May Dent India's GDP by 30 Basis Points

The imposition of 25% tariffs by the United States on certain imports could decrease India's GDP growth rate by 30 basis points this fiscal year, according to a report from Barclays. Despite this potential decline, India's economy, largely driven by domestic demand, might not feel the impact significantly.

If these tariffs, announced by then-President Donald Trump, take effect on August 1, the average US tariff on Indian goods would dramatically increase to 20.6% in trade-weighted terms, a significant jump from prior rates. However, the tariffs on US goods imported into India remain lower.

With India's primary growth stemming from domestic demand, Barclays and analysts from Moody's Analytics suggest the impact may be limited. Key sectors like pharmaceuticals and textiles could be affected, but ongoing trade negotiations may alleviate some concerns. India's recent steps to secure free-trade agreements demonstrate its commitment to diversifying markets and strengthening economic resilience.

(With inputs from agencies.)