A report by the consultancy firm EY, titled “Economy Watch,” suggests that India can limit the negative impact of the higher U.S. tariffs to about 0.1% of its GDP. The firm’s analysis is more optimistic than other reports and anticipates a potential reduction of only 10 basis points from India’s expected 6.5% growth in FY2026. This optimistic outlook is contingent on India implementing countermeasures like diversifying its exports, strengthening domestic consumption, and expanding its production base.
The report notes that the U.S. tariffs, which now total 50%, could potentially affect around 0.9% of India’s GDP. However, EY believes the actual impact will be lower, estimating a 0.3% effect on GDP assuming one-third of the impact results in a fall in demand. The report also pointed out that the U.S. economy itself might be impacted by retaliatory measures from other countries and could even face a recession. EY also mentions that measures announced by Prime Minister Narendra Modi, such as GST reforms and a new employment promotion scheme, are expected to strengthen domestic demand and help offset the tariffs’ effects.