US trade deal could push India's growth above forecast: CEA Nageswaran

By Anup Roy

 

India’s economy could grow even faster than the government’s earlier forecast after the US substantially lowered tariffs on Indian goods, the country’s chief economic adviser said. 

“We are looking at probably something close to this year’s growth estimate of 7.4 per cent,” V. Anantha Nageswaran said in an interview Tuesday with Bloomberg Television’s Haslinda Amin. “That could be my first guess but I need to go back to my spreadsheets,” he said, noting the tariff announcement came late Monday. He had forecast 6.8 per cent to 7.2 per cent growth in the economic survey released last week.

 

 

The US will cut its levy on Indian goods to 18 per cent from 25 per cent, lower than most Asian peers, while an additional 25 per cent punitive duty tied to purchases of Russian oil was scrapped. While announcing the deal on social media, US President Donald Trump said Indian Prime Minister Narendra Modi had agreed to buy $500 billion of US goods and halt crude purchases from Russia, a key demand of Washington.

 

Lower US tariffs would remove a key external impediment to India’s growth, easing pressure on exports and investment amid fragile global demand. The shift would make India more attractive to global companies looking to set up manufacturing bases to supplement China-centered supply chains, reinforcing Modi’s push to sustain high growth and meet his goal of turning India into a developed economy by 2047.

 

Asked whether the deal could lead to higher energy prices if India stops buying discounted Russian oil, the chief economic adviser said crude prices of $60 to $70 a barrel are “not something historically problematic for the Indian economy.” He declined to comment on specifics, including how India would scale up purchases from the US over five years.

 

Nageswaran’s bullishness was echoed by Indian markets, with the rupee posting its biggest gain in more than three years and stocks jumping the most since 2021 on Tuesday. Other economists are also poised to revise their growth estimates for Asia’s third-largest economy.

 

“The tariffs were a drag on our growth forecast of 6.9 per cent for the next fiscal. Now that it is gone, our forecast may go up by 20 to 30 basis points under the current series,” said Sakshi Gupta, economist at HDFC Bank Ltd.