Trump’s Tariffs May Cause 0.2% GDP Loss to India: Reports
In a recent development, US President Donald Trump’s decision to impose 25% tariffs on Indian goods has raised concerns about the potential impact on India’s economy. According to reports, this move could result in a 0.2% loss to India’s GDP, translating to ₹330.68 lakh crore nominal in FY 2024/25.
The tariffs, which were announced in June, are a part of the ongoing trade tensions between the US and India. The US has accused India of unfairly discriminating against American companies, while India has maintained that it is simply protecting its domestic industries.
The 0.2% GDP loss is significant, but experts believe that the impact will be “negligible” and “manageable” for the Indian economy. Government sources have also downplayed the effects of the tariffs, citing the country’s strong economic fundamentals and its ability to absorb the shock.
How Will the Tariffs Affect India?
The tariffs on Indian goods are expected to affect a range of industries, including textiles, leather, and gems and jewelry. The biggest losers will likely be small and medium-sized enterprises (SMEs) that rely heavily on exports to the US.
India’s textile industry, which is one of the largest employers in the country, is expected to be hit hard by the tariffs. The industry exports around $6 billion worth of goods to the US each year, and the 25% tariff will make it harder for Indian exporters to compete with their rivals.
The leather industry is also expected to be affected, as India is a major exporter of leather goods to the US. The gems and jewelry industry, which is a significant contributor to India’s exports, will also be impacted.
Impact on Indian Exports
The tariffs will likely lead to a decline in Indian exports to the US, which could have a ripple effect on the Indian economy. Exports account for around 12% of India’s GDP, and a decline in exports could lead to a slowdown in economic growth.
However, experts believe that the impact will be limited, and that the Indian economy is strong enough to absorb the shock. India’s economy grew by 7.2% in the quarter ended June, and the country’s fiscal deficit is expected to be around 3.8% of GDP in the current fiscal year.
Government Response
The Indian government has been working to mitigate the impact of the tariffs on Indian exports. The government has announced a package of incentives to support exporters, including a reduction in the interest rate on export credit and an increase in the duty drawback scheme.
The government has also been working to diversify India’s export basket, and to reduce its dependence on the US market. India has been negotiating free trade agreements with other countries, including the UK and the EU, to reduce tariffs and increase exports.
Conclusion
While the tariffs imposed by the US on Indian goods may cause a 0.2% loss to India’s GDP, the impact is expected to be “negligible” and “manageable” for the Indian economy. The government has taken steps to mitigate the impact, and experts believe that the economy is strong enough to absorb the shock.
However, the tariffs are a reminder of the challenges facing the Indian economy. The country needs to continue to work to diversify its export basket, and to reduce its dependence on a single market. The government also needs to continue to support SMEs, which are the backbone of the Indian economy.
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