India’s economy faces immediate challenges from the United States’ decision to impose 50% tariffs on Indian goods, but the disruption is likely to be temporary if the country turns the crisis into an opportunity, according to Ram Singh, Director at the Delhi School of Economics and Member of the RBI’s Monetary Policy Committee.He added, “I have two-dimensional views on this… in the interim, things could get worse before they become better… But I feel that everything considered, looking at a horizon of six months to one year and beyond… this is a crisis. If we use this as an opportunity, we can overcome not only that setback, which in my view is temporary, but we can emerge with a better house… our economy can emerge stronger in the final analysis.”Singh highlighted that the new US tariffs will have a significant impact on India’s economy. Out of India’s $90 billion exports to the US, nearly two-thirds are expected to be affected. This could translate into a loss of $20–30 billion in exports, equivalent to a 0.3–0.4% reduction in GDP growth.
Beyond the direct hit, there are likely to be indirect consequences. The tariffs imposed by the US on other countries could weigh on global growth, which in turn would affect India. Export-oriented sectors in India would also see reduced earnings and employment, leading to weaker domestic demand and slower GDP growth.The most affected industries are those dominated by MSMEs, such as gems and jewellery, textiles, apparel, diamonds, and fisheries. Since MSMEs are key drivers of India’s exports, the impact on them is expected to be particularly severe.On how India should respond, Singh stressed coordination between fiscal and monetary authorities:“These tariffs are going to impact not only our GDP growth rate but also have a direct bearing on inflation. Therefore, there is a case for monetary and fiscal policy coordination.”He suggested sector-specific concessions such as temporary tax breaks, higher duty drawbacks for exporters, and lower import duties on raw materials.On the monetary side, Singh said MSMEs and exporters could be supported with guaranteed credit lines, similar to the measures rolled out during the COVID-19 period.Former Indian Ambassador to the US, Arun Singh, however, underlined that these tariffs are not just about trade but also politics. He said the additional 25% duties must be seen in the context of President Donald Trump’s domestic compulsions, particularly criticism over his handling of the Russia–Ukraine conflict.Unlike China, which has shown countervailing power through reciprocal tariffs and export controls, India was seen as an easier target. This, Singh warned, could damage the perception of the US as a reliable partner.Arun Singh noted that there remains a “window for diplomacy,” but emphasised that the US must ultimately reassess the importance of its relationship with India.He highlighted that India plays a crucial role in global technology and innovation, pointing to the presence of over 1,700 global capability centres in India and the country’s strong talent base in semiconductor design. If Washington truly values this partnership, he argued, it will need to treat India differently.
