Tariffs could shave half percentage point off growth: Economic Affairs Secretary

File picture: Ajay Seth, Secretary, Department of Economic Affairs
| Photo Credit:
ANI

US tariffs on India could shave up to half a percentage point off the country’s economic growth, a top Indian government official said, adding that a more significant problem would be the global economy slumping.

The “first order” hit from US reciprocal tariffs on India, if imposed, could reduce the nation’s gross domestic product by between 0.2 and 0.5 percentage points, according to Economic Affairs Secretary Ajay Seth. He categorised that figure as having “not a huge impact.”

“But the second order would be important,” Seth said in Washington on Wednesday. “The second order is if the global economy grows less” than expected.

The International Monetary Fund slashed its forecasts for world growth this year and next on Tuesday, warning the outlook could deteriorate further as US President Donald Trump’s tariffs spark a global trade war. It lowered its global projection for 2025 to 2.8 per cent from 3.3 per cent.

The Indian government is maintaining its growth outlook for the 2025-2026 fiscal year of 6.3% to 6.8%, Seth said. The IMF lowered its 2025 forecast for the South Asian nation to 6.2%. The trade uncertainty has clouded the nation’s prospects, with banks including Morgan Stanley and Goldman Sachs Group Inc. pruning their own forecasts to 6.1%, down from last year’s growth of 6.5%.

Seth said it’s too soon to revise the $4 trillion economy’s outlook because its still negotiating to avoid 26% levies on exports to the US, one of its biggest trading partners. He’s optimistic about a deal with Washington, though he gave no specific details on the talks.

They are “moving strongly,” he said.

The US and India have made progress on a bilateral trade deal following talks between Modi and American Vice President JD Vance, who visited India this week.

India’s chief negotiator, Rajesh Agrawal, is set to visit the US this week. In the last few months, Delhi has cut import duties on American products, including Harley-Davidson Inc. motorbikes and bourbon whiskey, and pledged to tear down trade barriers. It also plans to buy more American energy and defense goods.

India’s Finance Minister Nirmala Sitharaman was meant to meet US Treasury Secretary Scott Bessent around the IMF spring meetings in Washington this week. But she flew back to India after gunmen killed at least 26 people in the region of Jammu and Kashmir, one of the worst attacks on civilians in India in years. Prime Minister Narendra Modi also cut short a visit to Saudi Arabia.

More stories like this are available on bloomberg.com

©2025 Bloomberg L.P.

Published on April 24, 2025