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4w ago

CEA Flags Nominal GDP Shortfall for FY26, Sees 0.5–0.6 Point Hit From U.S. Tariffs

The chief economic adviser says benign inflation will likely pull nominal growth below the 10.1% budget assumption.

India's Chief Economic Adviser V. Anantha Nageswaran gestures during a press conference in New Delhi, India, January 31, 2025. REUTERS/Priyanshu Singh/File Photo
India's Chief Economic Adviser V. Anantha Nageswaran.
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Overview

  • V. Anantha Nageswaran maintained the real GDP growth goal of 6.3–6.8% for FY26 despite external headwinds.
  • He estimated the new 50% U.S. tariff on Indian goods could subtract about 0.5–0.6 percentage points from GDP this year if temporary, with a larger impact if it persists into the next fiscal.
  • Exporter groups warn the tariff action could touch nearly 55% of India’s $87 billion in U.S.-bound merchandise, with labor‑intensive sectors such as textiles and jewellery most exposed and rivals like Vietnam and Bangladesh gaining.
  • Recent GST rate consolidation that lowers prices on roughly 400 items, together with earlier direct tax relief and soft inflation, is expected to support consumption, with the CEA citing a potential 0.2–0.3% lift to GDP.
  • Momentum from April–June growth of 7.8% real and 8.8% nominal underpins the outlook, and the government expects to meet a 4.4% fiscal deficit target helped by a large central bank payout and asset sales.