The Indian economy, despite a robust 7.8 percent growth in the first quarter, is projected to decelerate to 6.5 percent for the current financial year, primarily due to the adverse effects of US tariffs on exports. The Asian Development Bank (ADB) revised its earlier forecast of 7 percent down to 6.5 percent, reflecting concerns over the steep 50 percent tariffs imposed on Indian shipments. While the initial growth was bolstered by increased consumption and government spending, the anticipated decline in export performance, especially in the latter half of FY26 and into FY27, poses a significant challenge to sustaining this momentum. The tariffs are expected to dampen the overall economic outlook, highlighting the vulnerability of India's export sector to international trade policies.
Key insights from the ADB's report indicate that while the tariffs will negatively impact GDP growth, resilient domestic demand and service exports may mitigate some of the adverse effects. The ongoing adjustments in the global trade landscape necessitate a strategic response from India to bolster its export competitiveness. Policymakers must prioritize enhancing domestic capabilities and diversifying export markets to counterbalance the tariff-induced setbacks. The implications of these developments extend beyond immediate economic metrics, as they underscore the importance of adaptive strategies in navigating the complexities of international trade relations and sustaining long-term economic growth.
