India’s economic system might develop slower than beforehand anticipated in FY26, with HSBC Chief India Economist Pranjul Bhandari warning that US President Donald Trump’s sweeping tariff hike could shave off 0.5 share factors from GDP development this yr.
“We (India) promote quite a lot of items to the US and now we might be charged further tax on that, which is increased than what you had been charged earlier than,” Bhandari mentioned in an unique interview with Enterprise Right now’s Rahul Kanwal. “Someone must bear that ache—both the Indian producer of that good or the American shopper of that good or a mixture of the 2.”
Bhandari estimates India’s GDP development could possibly be decrease than earlier projected because of the direct hit from tariffs. “For instance, I used to be anticipating development to be 6.5% however it could possibly be 6% now or perhaps barely decrease,” she mentioned. “So there’s going to be a development drag on the again of all of this.”
Whereas the Reserve Financial institution of India’s price cuts could assist cushion the blow, Bhandari flagged a second, extra worrying impression: a slowdown in world commerce volumes.
“There’s additionally an oblique drag which we’ve got to be very cautious about. With all of those tariffs, world development volumes will gradual…There’ll be this huge oblique impression. My sense is that GDP development in India goes to be decrease in FY26 far more than we had thought.”
On sector-specific results, Bhandari mentioned the impression is fluid and extremely delicate to coverage modifications. “We will talk about a set of winners and losers at present, but when any modifications are made that set might fully change tomorrow,” she famous.
For example, she identified that pharma exporters initially feared successful, however their outlook modified in a single day when prescription drugs had been exempted from the tariffs. “So at present, the pharma shares did very properly…however there are a lot of different sectors —textile, autos, agri, chemical substances — which is able to now face increased tariffs than we thought simply 48 hours in the past.”
The uncertainty, she mentioned, might stall funding. “Individuals who wish to do investments in capex on pharma or textile—they’re going to all sit again. No person will do something as a result of issues are altering fairly quickly with a stroke of a pen.”
The US has imposed 27% reciprocal tariffs on most Indian items beginning April 9, over and above the baseline 10% efficient from April 5. Whereas sectors like vitality, semiconductors, and choose prescription drugs have been exempted, key Indian exports together with clothes, medical units, and jewelry are anticipated to be affected.
The Indian authorities has mentioned it’s intently evaluating the impression and exploring methods to show the disruption into alternative by deeper commerce engagement with the US.
