Calls for reforms rise as additional 25% levy may impact growth, jobs
Estimates showed initial 25% tariff imposed on Indian exports would have a muted impact on growth in the range of 0.2-0.4 percentage points. However, additional 25% tariff could impact growth and jobs in some of the key export sectors and could hurt overall sentiment. There is a window open for talks, with a team from US expected to visit India on Aug 25, which could help ease some of tariff burden.
Goldman Sachs said it expects some more potential impact on growth due to additional tariff.
"We previously estimated a potential direct impact of around 0.3 percentage point (annualised) to India's real GDP growth, following President Trump's announcement of a 25% tariff," it said in a report. "If the new additional duty (including exclusions) is enforced, then that would constitute a potential incremental drag of around another 0.3 percentage points (annualised)," the report said, adding, 4% of India's GDP is exposed to US final demand.
Goldman Sachs, however, said it was not making any changes to its growth forecasts for calendar years 2025 and 2026 for now as there is a three-week window for negotiations until the new incremental tariffs roll out. RBI on Wednesday kept its growth forecast unchanged at 6.5% for the current fiscal year but cautioned about the "headwinds emanating from prolonged geopolitical tensions, persisting global uncertainties and volatility in global financial markets pose risks to the growth outlook.
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Trump's announcement of additional 25% tariff for India has sparked dismay and outrage, with external affairs ministry calling the move "unfair, unjustified and unreasonable."
However, it also triggered calls from top industrialists and bureaucrats for more aggressive reforms, from ease of doing business to GST revamp to labour reforms and privatisation, and stepping up tourism to help overcome any adverse impact of Trump's unfair decision.
Industrialist Anand Mahindra said US tariffs would have unintended consequences of creating new growth drivers and India should use the opportunity to unleash reforms like the ones rolled out in 1991 and promote tourism as a forex engine.
Ficci president Harsha Vardhan Agarwal said it was time to focus "all our energies" into strengthening industrial economy and services sector. "Trump has provided us a once in a generation opportunity to take the next big leap on reforms. Crisis must be fully utilised," former G20 Sherpa and former CEO of govt's policy think tank Niti Aayog Amitabh Kant said on microblogging site X.
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