Trump’s Tariffs Could Hit India’s GDP – But Modi’s Masterstroke May Turn It Into an Opportunity
Experts suggest reforms to support SMEs, boost service exports, and unlock growth via tourism and manufacturing
India’s GDP May Be Affected
Trump’s proposed tariffs could reduce India’s GDP by 30–50 basis points in FY 2025–26, mainly due to pressure on exports—especially in labor-intensive sectors. This could also affect employment and consumption in the domestic market.
How to Offset the Impact?
Experts believe the impact can be mitigated through domestic reforms, financial and operational support to small exporters, and by encouraging diversification into alternative markets. Boosting the service and tech export sector is crucial to compensate for loss in goods exports.
Need to Implement Manufacturing Policy
Focus on domestic economy and consumption could support indigenous companies and create jobs. Rationalizing import duties on raw materials can lower domestic production costs. Rapid implementation of the previously announced manufacturing policy is essential.
Turning Crisis into Opportunity
Former NITI Aayog Vice-Chairman Amitabh Kant believes the tariff issue is a chance for large-scale reform. Anand Mahindra suggests creating a genuine single-window clearance system to ease investments and make India a global hub.
Boost Tourism to Earn Forex & Create Jobs
Mahindra also recommends prioritizing the tourism sector, which can both generate foreign exchange and create massive employment across the country.
SMEs Need Special Incentives
Experts argue that SMEs, especially in labor-heavy sectors like textiles and leather, will be the worst-hit. India exports around $10B in garments and $1.3B in leather products to the US annually.
Exporters Expect Government Support
Farida Group Chairman Rafiq Ahmed, whose 60% of exports go to the US, says 12,000 jobs depend on these exports. He urges immediate government incentives or bilateral resolution with the US. Similar concerns exist in the textile sector.
PLIs & Interest Subsidies for Small Exporters
Madan Sabnavis, Chief Economist at Bank of Baroda, notes that large companies can absorb the impact, but small exporters need targeted support like PLIs, interest subsidies, and job-linked incentives.
21-Day Window for Resolution
India’s economy stands at $3.8 trillion with $440B in goods exports, of which $88B go to the US. A 50% tariff could result in losses of $35–40B. HDFC’s Chief Economist Sakshi Gupta says there are still 21 days to resolve the issue. If not, India’s GDP growth could fall by 0.4–0.5%.
Madan Sabnavis adds that although exact estimates are difficult now, prolonged tariffs could shave off 0.3% from GDP growth.