Trump tariffs may trim 0.5% from India's FY26 GDP: CEA Nageswaran

V Anantha Nageswaran warns prolonged US tariffs pose a major risk to growth, but remains confident of meeting India's 6.3-6.8 per cent GDP target for FY26

Chief Economic Adviser V Anantha Nageswaran on Monday said the 50 per cent tariff imposed by the US could reduce India’s gross domestic product (GDP) by 0.5 per cent in FY26.

 

"Depending upon how long it lasts even in this financial year, it may translate into a GDP impact of somewhere between 0.5 per cent to 0.6 per cent," he told Bloomberg TV.

 

Nageswaran said he hopes the tariffs are a "short-lived phenomenon". If they extend into the next financial year, he cautioned, the drag would be greater and pose a “major risk” to India’s growth momentum. 

 

The steep duties imposed by US President Donald Trump came into effect on August 27. They comprise a 25 per cent secondary tariff and a 25 per cent penalty linked to India’s purchase of Russian crude oil.

Optimism despite tariff pressure

Despite these headwinds, Nageswaran said India is on course to achieve real GDP growth of 6.3–6.8 per cent in FY26, in line with government's projections. The economy expanded by 7.8 per cent in the first quarter, the fastest pace in over a year, he noted.

GST overhaul impact

Nageswaran also projected that the Goods and Services Tax (GST) overhaul could lift GDP by 0.2–0.3 per cent. He said India remains on track to meet its fiscal deficit target of 4.4 per cent this year, supported by the Reserve Bank of India’s record dividend transfer and asset sales that will help offset revenue shortfalls.

 

Delivering on Prime Minister Narendra Modi’s promise, Finance Minister Nirmala Sitharaman recently announced major GST reforms, cutting four slabs to a simplified two-tier structure of 5 per cent and 18 per cent, alongside a flat 40 per cent rate on ‘sin goods’.