US reciprocal tariffs may erode India’s GDP by up to 50 bps: Experts

New Delhi: India’s GDP growth could be reduced by up to 50 basis points, bringing it down to 6 per cent for the current fiscal year, due to the newly announced reciprocal tariffs by the Trump administration, economic experts said on Thursday. Additionally, India’s exports to the US may decline by 2-3 percentage points as a result of the tariffs.

D K Srivastava, Chief Policy Advisor at EY, noted that the maximum potential impact on India’s GDP growth would be 50 basis points. “Our earlier projection for GDP growth this fiscal was 6.5 per cent, but with these tariffs in place, it could decline to 6 per cent unless India takes countermeasures,” Srivastava said.

Anubhuti Sahay, Head of India Economics Research at Standard Chartered Bank, estimated that the effective 20 per cent tariff increase on Indian exports to the

US, after factoring in exemptions, could impact India’s GDP by 35-40 basis points. “However, the final outcome depends on how India and the US negotiate and respond to the proposed tariffs,” Sahay added.

While acknowledging that the higher tariffs would inevitably impact India’s GDP, Sahay pointed out that India might face a relatively lower impact compared to other Asian economies. “Many other countries have been subjected to higher tariffs than India or have a larger trade surplus with the US in non-exempted sectors,” she explained.

The US has implemented a 27 per cent reciprocal tariff on Indian goods, citing high import duties imposed by New Delhi on American products.

Currently, Indian imports into the US are already facing a 25 per cent tariff in steel, aluminium, and auto sectors. For other products, a baseline tariff of 10 per cent is in effect from April 5 to 8, which will increase to a country-specific 27 per cent from April 9.

Srivastava suggested that India could counteract the tariff impact by increasing imports from the US, particularly in crude oil, gas, and high-technology products like aircraft and defence equipment. “The focus should be on trade balance rather than tariff rates,” he said, emphasising that some tariff rates in India could be reduced without significantly increasing US imports into the Indian market.

Rajiv Arya, National Head of Accounting and Business Support at Baker Tilly ASA India, highlighted the need for India to revisit its economic liberalisation policies. “For the past three decades, India has operated as a protectionist economy. What initially started as a tariff reduction strategy has now resulted in some of the highest tariff rates globally,” Arya said. Economists at Morgan Stanley, Upasana Chachra and Bani Gambhir, projected a downside risk of 30-60 basis points to India’s growth forecast of 6.5 per cent for FY26. “While the tariff increase exceeds our estimates for India, they are still comparable or lower than those imposed on other competing economies.

With India’s goods exports to the US accounting for 2.1 per cent of GDP, the direct impact is likely to be limited.

However, the indirect effects—such as reduced corporate confidence and deferred capital expenditure—could have a more pronounced impact,” Morgan Stanley

analysts stated.