New Delhi, 10 Sep

The steep 50 per cent tariffs imposed by the US on Indian shipments are expected to drag GDP growth by only 0.2-0.3 per cent in FY26, Chief Economic Adviser V Anantha Nageswaran said on Wednesday, adding that recent GST reforms will help cushion the impact.

The GST Council recently overhauled the tax structure, reducing four slabs to two (5 per cent and 18 per cent) and introducing a 40 per cent rate on sin and luxury goods. Nearly 400 items, including cars, tractors, and household products, will become cheaper from 22 September, the first day of Navaratri.

“These reforms will boost domestic demand, offsetting potential export losses to the US,” Nageswaran said, noting that exports to the US had already reached half of last year’s level in the first five months of FY26.

The tariffs, including a 25 per cent penalty on crude oil imports from Russia, affect labour-intensive sectors like textiles, gems, jewellery, leather, footwear, shrimp, and machinery, while pharma, energy, and electronics remain exempt. The US accounted for about 20 per cent of India’s $437.42 billion exports in 2024-25.

On domestic reforms, Nageswaran highlighted the potential of agriculture to contribute an additional 0.5-0.7 per cent to GDP if farmers are given greater freedom to sell produce and access markets, alongside proper insurance mechanisms.

Regarding global trade, he clarified that India is not part of any initiative to replace the dollar in cross-border transactions, although BRICS nations have explored using local currencies for trade.