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On Trump tariff shock, India's chief economic advisor's big prediction: ‘Extremely challenging, but…’
Chief economic advisor V Anantha Nageswaran warned that the US's 25% tariff on Indian exports will challenge business conditions and economic growth.
Chief economic advisor V Anantha Nageswaran has warned that the additional 25 per cent tariff imposed by US President Donald Trump on Indian exports will make business conditions “extremely challenging” and weigh on economic growth in the coming quarters.
Nageswaran told The Indian Express that the ripple effects of the tariff hike will be felt particularly in the second and third quarters of the current financial year. Nageswaran, however, expressed confidence that the tariff measure would be shortlived.
“You can do your calculations, but unfortunately you have to make multiple assumptions about second- and third-round effects on uncertainty, capital formation, and employment. I think there will be an impact on GDP growth in the second and the third quarters, assuming that the situation continues,” the newspaper quoted Nageswaran as saying.
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“I do feel that it (high tariff) will be more short-lived than long-lived,” Nageswaran added.
When asked about reasons for his optimism that the extra 25 per cent tariff would be short-lived, Nageswaran said there were indications that the US administration was beginning to realise that the measure was “not yielding the desired results and was becoming counterproductive”.
According to him, the drag on growth could be in the range of 0.3 to 0.5 percentage points this year. India’s GDP rose to a five-quarter high of 7.8 per cent in April–June 2025, while the Reserve Bank of India has projected 6.5 per cent growth for FY26.
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Nageswaran said the full impact of the higher tariff would be felt only if it continues into the next financial year. “So the fiscal second and third quarters will be critical, but I hope by then the second 25 per cent (tariff) would have been resolved. If it continues into the next financial year and lasts, that would be a huge challenge both in terms of employment and GDP growth,” he said.
Chief economic advisor on finding new export markets
The CEA noted that finding new export markets would not be easy given China’s aggressive push. China, also facing challenges with exports to the US, has the ability to finance buyers, offer long lead times for payments, and provide product and price discounts.
“In that sense, it does raise the dependence on domestic levers of growth that much more. So that is a formidable task on hand for us,” he said.
On the domestic front, Nageswaran said the recent reduction in GST rates would support consumption. He also downplayed concerns over revenue losses for states due to GST rationalisation.
Responding to a question on the steps India needs to take to mitigate the impact of higher tariffs, Nageswaran said India has been focusing on things that were good for it rather than responding to tariffs.
He added that there has been an increase in India’s purchases of fuel and defence products from the US and overseas direct investment made by Indian businesses in the US over the last 20 years.
