New Delhi: The 25 per cent US tariffs, plus a penalty for Russian imports, could dent India’s GDP growth by 30 basis points in the current fiscal, but the higher duty is unlikely to significantly affect India’s domestic demand-driven economy, Barclays said on Thursday.
If the 25 per cent tariff, announced by US President Donald Trump on Wednesday, is implemented from August 1, the effective average US import tariff on Indian goods will rise to 20.6 per cent in trade-weighted terms, as per Barclays estimates.
This is sharply higher than both the pre ‘liberation day’ tariff rate of 2.7 per cent and the 90-day pause tariff rate of 11.6 per cent. In contrast, India’s import tariff on US goods is lower, at 11.6 per cent in trade-weighted terms.
Barclays said that given the relatively closed nature of the Indian economy, wherein domestic demand is the mainstay of growth. “We do not see this 25 per cent tariff threat impacting GDP growth meaningfully, pegging the likely impact at 30 bp.
We expect final tariffs on India to settle in lower than the announced 25 per cent, as India and the US continue with trade deal talks,” it said.
Indian economy is projected to grow at 6.5 per cent by the Reserve Bank-- same as last fiscal, while the IMF and Asian Development Bank (ADB) peg growth at 6.4 per cent and 6.5 per cent respectively.