The reciprocal tariff announced by the Trump administration can shave off India's GDP growth rate by up to 50 basis points to 6 per cent and the country's exports to the US could fall by 2-3 percentage points in the current fiscal, experts said on Thursday.
EY Chief Policy Advisor D K Srivastava said, "The maximum adverse impact on India's GDP growth will not be higher than 50 basis points. As per our earlier projection, the GDP growth estimate for current fiscal was 6.5 per cent, which may go down to 6 per cent without retaliation".
Standard Chartered Bank Head - India, Economics Research, Anubhuti Sahay said an effective 20 per cent tariff increase on Indian exports to the US ( after considering the exempted goods) in our view is likely to adversely impact India's GDP by 35-40 bps, ceteris paribus.
"However, the final impact would depend on the trade deal agreement between India and the US along with how each country negotiates/ retaliates on the proposed tariffs," Sahay said.
She said while a loss in India's GDP is inevitable on higher tariff rate imposition, India is likely to be relatively less impacted amongst the Asian economies as other countries have been hit by higher tariff rates than India or run a larger trade surplus with the US especially in the non-exempted sectors.
According to EY's Srivastava, the US tariff hikes could have a favourable impact on the country's exchange rate as the dollar could come under pressure in the US with a likely rise in inflation.
The US has announced 26 per cent reciprocal tariffs on India saying New Delhi imposes high import duties on American goods, as the Trump administration aims to reduce the country's trade deficit and boost manufacturing.
Essential and strategic items such as pharmaceuticals, semiconductors, copper, and energy products like oil, gas, coal and LNG are exempted from higher tariff rates.
-- PTI
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