India’s GDP Growth in Jeopardy as Trump Imposes Tariffs and Sanctions

August 1-Kolkata, India: According to some financial analysts, US President Donald Trump’s imposed tariffs and sanctions could decrease India’s GDP Growth by 50-60 points.

On Thursday, the US President officially levied a 25% tax on India for keeping relations with Russia, and he also vowed to impose more sanctions and tariffs on India’s previous business trade with Russia.

The Reserve Bank of India (RBI) previously predicted that the Indian economy would expand by 6.5% in the year 2025-26. According to a report by the Union Finance Ministry, the economy is expected to advance by 6.3-6.8%. As per information, US President Donald Trump’s 25% tariff with additional sanctions can affect the Indian economy, and the GDP growth rate can fall to below 6.1 per cent.

Trump’s Tariff can decrease the GDP Growth

The State Bank of India (SBI) has recently highlighted this issue and stated that a 20 percent tariff could reduce India’s GDP by as much as 50 basis points (0.5 percent). However, a 25% tariff would decrease it by about 62 points, decelerating India’s GDP growth to about 5.87 percent.

The SBI further added that “any 1 per cent rise in tariff may lead to a 0.5 per cent decline in export volumes.”

Due to the 25% tariff, it would also mean that there is going to be a 12.5% decline in exports, and it would be a massive blow for the Indian economy, as the United States is its second-largest destination for exports. According to some financial analysts, the impact of the tariff might be between 40 and 50 basis points.

Financial Analyst’s view on this issue

Economists Dhiraj Nim and Sanjay Mathur of ANZ also shared their views on this issue and said that “if 25 per cent tariff remained in place for the remainder of 2025-26, “it could subtract 40 basis point from GDP growth.”

Nomura Holdings stated that “Taking into account the sectoral exemptions, we estimate the effective tariff rate (for India) at ~20 per cent. The announced reciprocal tariff rate of 25 per cent, however, may be temporary, and might settle lower, as negotiations will continue after August 1. However, the best-case outcome would still be tariffs in the 15-20 per cent range, which is disappointing, considering India’s more advanced stage of negotiations.”