Experts predicted Trump tariffs could cut India’s growth rate: GDP figures prove them wrong

Contrary to forecasts that US President Donald Trump’s tariffs could push India’s economic growth below 6 per cent this year, official estimates published ahead of the Budget have revised the Reserve Bank of India’s (RBI) projection upward to 7.4 per cent.

The revision follows
better-than-expected growth of 8.2 per cent in the July-September quarter, driven by strong manufacturing and services sectors. Official estimates suggest this momentum will continue across sectors throughout the financial year.

Previously, when Trump imposed a 25 per cent tariff on Indian goods, analysts warned that annual GDP growth could fall to 5.87 per cent.

However, a series of measures by the government, the RBI, and industry players has helped India weather the storm. The performance is real —not an artificial spurt— as growth has been broad-based, accompanied by private investment, and supported by strong fundamentals.

What experts said about India’s growth — and why they were wrong

At the time Trump launched his first tariff salvo,
an official predicted India’s growth could dip by 0.2 per cent. That has not happened.

The State Bank of India (SBI) estimated that a 25 per cent tariff could shave off around 62 basis points, dragging GDP growth down to 5.87 per cent. Barclays projected a hit of 30 basis points while Nomura forecast 20 basis points.

But GST reforms that reduced indirect taxes on most goods and services ahead of the festive season, an RBI rate cut, and increased government spending helped shore up growth. Importantly, this does not mean growth is entirely the result of government intervention.

A sharp upward projection for manufacturing —7 per cent in 2025-26 compared to 4.5 per cent the previous year— suggests the growth is real. Similarly, services grew at 9.9 per cent, including financial and professional services, while trade, hotels, and transport sectors expanded by 7.5 per cent.

This indicates growth was not concentrated in a single sector.

Moreover, private investment growth is projected at 7.8 per cent, up from 7.1 per cent the previous year, showing businesses are making real commitments rather than responding to temporary stimuli.

Jahnavi Prabhakar, an economist at Bank of Baroda, noted that the Indian economy remains resilient on the back of festive demand and steady improvement in economic activity. She added that trade deals with the United Kingdom, Oman, and New Zealand have also been helpful.

Strong festive sales, along with GST rationalisation and income tax cuts, are expected to boost consumption, Prabhakar told NDTV Profit.

“Even the post-festive demand has been holding up. Uptick in demand has already been reflected by recent momentum from some of the high-frequency indicators such as auto sales,” Prabhakar said.