India’s economy could take a 0.5–0.6% hit to gross domestic product (GDP) due to the additional 25% tariffs imposed by the US, according to Soumya Kanti Ghosh, Group Chief Economic Adviser at State Bank of India.Ghosh explained that the decline in GDP stems from weaker demand for Indian exports and an expected slowdown in global trade. He stated that while 25% tariffs have already been priced in to some extent, further escalation would deepen the impact. “We have projected GDP at 6.3%, which is already lower than RBI’s 6.5% forecast,” he said, adding that more severe effects may surface if tensions aren’t resolved soon.Exports to the US could drop, he said, especially in key categories like gems and jewellery, textiles, and certain auto components. This could widen the current account deficit by 20–30 basis points, though Ghosh remained cautiously optimistic. “Even then, CAD should stay below 1% of GDP,” he said, citing strength in India’s services exports.
Despite these concerns, the rupee has remained relatively steady. Ghosh attributed this to the RBI’s active intervention in the currency markets, helping offset outflows caused by the trade shock.Also Read: ‘You may as well not have a business’ says Baba Kalyani on 50% US tariffJoining the discussion, Lakshmanan V., Group President and Head of Treasury at Federal Bank, said that markets haven’t panicked yet. “There’s reasonable evidence that the market is not wanting to overreact at this stage,” he said, adding that foreign portfolio flows have been mixed but not decisively negative. The rupee is trading in a stable 86.5–88 range, with 88 seen as a key resistance level unless there are “incremental actions beyond rhetoric.”Both experts agreed that the sectors bearing the brunt of these tariffs are labour-intensive ones—particularly gems and jewellery and textiles. These industries face the risk of job losses and shrinking orders. In contrast, exports like electronics, machinery and pharmaceuticals are either currently exempt or less exposed, though pharma could suffer in case of retaliatory action.Also Read: Textile and jewellery exporters warn of festive order loss as US tariff drives buyers awayTo cushion the blow, Ghosh suggested short-term support measures such as reviving the discontinued export credit guarantee scheme for affected sectors. He also called for long-overdue structural reforms. “Some of the small, incremental reforms, even if we go ahead and do that, will be beneficial for all of us in the long term,” he said, referring to steps like finalising an agricultural export policy and pruning regulatory redundancies.For the entire discussion, watch the accompanying videoCatch all the latest updates from the stock market here
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