India's Economic Growth Projections and Global Trade Impact
India is anticipated to achieve an economic growth rate of 6.3-6.8% in the fiscal year 2025-26. This projection accounts for several external challenges, including the recent global trade war. The US's imposition of "reciprocal tariffs" has necessitated a reassessment of India's economic outlook.
Impact of US Tariffs
- The US has announced a 26% tariff on imports from India, effective from April 9.
- This decision is part of a broader move that includes significant tariffs on other countries, such as China and Vietnam.
- India's growth in 2024-25 was around 6.5%, according to the government's second advance estimate.
Forecasts and Economic Considerations
- Goldman Sachs has adjusted India's growth forecast for 2025 and 2026 down by 30 basis points and 20 basis points, respectively, to 6.1%.
- Nomura projects growth at 6.2% for 2024-25 and 6% for 2025-26.
- Other analysts, including HSBC and UBS Securities, expect the tariffs to reduce growth by 20-50 basis points this fiscal year.
Potential Positive Outcomes
A favorable trade deal between India and the US could mitigate the negative impacts of the tariffs. India's strategic alliance with the US and relative tariff advantages compared to rivals might result in economic benefits through supply-chain shifts, particularly at the expense of countries like Vietnam.
Sectoral Impact
- The government is cautious about the impact on labor-intensive sectors such as agriculture, textiles and garments, and gems and jewelry.
