Trump’s Tariffs Threaten India’s Growth: Chief Economic Advisor Warns of GDP Hit

India faces a serious economic threat. According to Chief Economic Advisor V. Anantha Nageswaran, U.S. tariffs imposed by President Donald Trump could cut the country’s GDP by up to 0.6% this year.

Tariffs Doubled, Exporters in Shock In August, the United States doubled tariffs on Indian exports from 25% to 50%, citing India’s continued purchases of discounted Russian oil. This move placed India at the top of the list of Asia’s most heavily burdened economies. Nageswaran told Bloomberg TV that the sudden jump in tariffs has hit especially hard in textiles, jewelry, footwear, and leather goods — sectors that employ millions of Indians and rely heavily on U.S. demand. Cities like Surat, the world’s diamond-cutting hub, are already reporting declining orders, as American buyers turn to cheaper alternatives from Vietnam, Bangladesh, and Indonesia.

Impact on Jobs and Trade Balance The United States accounts for 18% of India’s total exports, and any disruption in supply chains directly threatens the trade balance. The most vulnerable regions are Gujarat, Tamil Nadu, and Maharashtra, where export-driven industries form the backbone of employment. Economists warn that if the tariff war drags on, India’s growth could shrink by 0.8% to even 1%.

Domestic Demand Keeps India Afloat Despite these headwinds, Nageswaran remains confident in India’s broader outlook. He expects GDP growth of 6.3% to 6.8% by March 2026. Strong domestic demand is helping cushion the blow. Inflation is falling toward an eight-year low, while recent cuts in income tax and GST on select goods are leaving households with more disposable income. These measures could add another 0.2–0.3% to GDP. At the same time, India is maintaining fiscal discipline. This year, the country is on track to meet its fiscal deficit target of 4.4%, supported by record asset sales and large transfers from the central bank, which are offsetting weaker export revenues.

Conclusion Trump’s tariff offensive poses a serious test for India. If trade tensions continue, the country could lose part of its growth momentum and millions of jobs in key export sectors. For now, however, strong domestic consumption and government measures are shielding the economy from the worst-case scenario.

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