India’s Chief Economic Adviser V Anantha Nageswaran said on September 10 that the hit to GDP from Trump's tariffs will be kind of modest -- somewhere between 0.2% and 0.3% -- thanks mainly to offsetting measures such as GST cuts, strong harvests and direct tax relief.
"GST reforms will play a very good offsetting role, by substituting domestic demand for whatever the export demand that may not materialise from the United States," Nageswaran said.
The US has imposed punitive tariffs -- up to 50% -- on Indian goods. A few days earlier, Nageswaran had warned that Trump's tariffs could trim between 0.5% and 0.6% off India’s GDP for the year, especially if they persist into the next fiscal year.
Economists broadly concurred with the CEA's outlook, with some estimates showing that the tariffs could shave off 30 to 80 basis points from India’s growth this fiscal year.
A shied from headwinds
Despite these external headwinds, India’s Q1 real GDP growth surged to 7.8%, the fastest in five quarters. Nageswaran called this a sign of macro-economic stability and saw the tariff shock as both a warning and an opportunity to accelerate reforms and diversify exports.
The GST overhaul has played a central role in cushioning the economy. Roughly 25% of consumer-price-index items -- primarily essential goods -- now attract a 5% tax, down from former rates of 12% or 18%. Several others are cut to 18%, a move economists say could reduce inflation by 50–90 basis points over the coming year.
Meanwhile, high-frequency data for August showed resilience in domestic demand. GST collections rose 6.5% year-on-year, UPI transactions crossed 20 billion for the first time, manufacturing activity surged to a 17-year high and power consumption climbed -- all of them clear signals of sustained internal momentum.
Some of CEA Nageswaran's latest commentaries have attributed India’s ability to withstand these shocks to years of structural reforms. He cites the Insolvency and Bankruptcy Code, GST, Real Estate Regulation Act and public-sector bank consolidation, all aiding compliance and general business ease.
The CEA also expects the tariff pressure to fade within a quarter or two.
"GST reforms will play a very good offsetting role, by substituting domestic demand for whatever the export demand that may not materialise from the United States," Nageswaran said.
The US has imposed punitive tariffs -- up to 50% -- on Indian goods. A few days earlier, Nageswaran had warned that Trump's tariffs could trim between 0.5% and 0.6% off India’s GDP for the year, especially if they persist into the next fiscal year.
Economists broadly concurred with the CEA's outlook, with some estimates showing that the tariffs could shave off 30 to 80 basis points from India’s growth this fiscal year.
A shied from headwinds
Despite these external headwinds, India’s Q1 real GDP growth surged to 7.8%, the fastest in five quarters. Nageswaran called this a sign of macro-economic stability and saw the tariff shock as both a warning and an opportunity to accelerate reforms and diversify exports.
The GST overhaul has played a central role in cushioning the economy. Roughly 25% of consumer-price-index items -- primarily essential goods -- now attract a 5% tax, down from former rates of 12% or 18%. Several others are cut to 18%, a move economists say could reduce inflation by 50–90 basis points over the coming year.
Meanwhile, high-frequency data for August showed resilience in domestic demand. GST collections rose 6.5% year-on-year, UPI transactions crossed 20 billion for the first time, manufacturing activity surged to a 17-year high and power consumption climbed -- all of them clear signals of sustained internal momentum.
Some of CEA Nageswaran's latest commentaries have attributed India’s ability to withstand these shocks to years of structural reforms. He cites the Insolvency and Bankruptcy Code, GST, Real Estate Regulation Act and public-sector bank consolidation, all aiding compliance and general business ease.
The CEA also expects the tariff pressure to fade within a quarter or two.
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