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Nomura said it maintained FY26 GDP growth forecast for India at 6.2% y-o-y, but flagged a downside risk of ~0.2 percentage point. “Taking into account the sectoral exemptions, we estimate the effective tariff rate (for India) at ~20%. The announced reciprocal tariff rate of 25%, however, may be temporary, and might settle lower, as negotiations will continue after August 1. However, the best-case outcome would still be tariffs in the 15-20% range, which is disappointing, considering India’s more advanced stage of negotiations,” it wrote.
HSBC Global Research said the elevated tariff rate, if levied, could shave off over 0.3ppt from India’s growth, and the penalty rate, yet to be specified, could shave off more. “From another lens, today’s announcement could reinvigorate negotiations on the India-US trade deal; we find that India has lowered oil imports from Russia in July.”
Moody’s Analytics said India’s economy is more domestically oriented than most in the region and relies far less on trade. “With headline inflation cooling and interest rates coming down over the first half of this year, the outlook for the domestic economy looks strong. Therefore, harm from he US tariffs should be relatively limited. Our July baseline has GDP growing 6.4% in 2025,” it said.
The US had a share of 19.8% in India’s merchandise exports in FY25. Exports to the US account for 2.2% of the country’s gross domestic product (GDP). According to HSBC, the penalty rate, if levied, could be “an indirect growth drag as well, led by lower capital inflows, investment, and suchlike.”
Goldman Sachs stated that if the new tariffs are enforced, combined with existing sector-specific tariffs on products like aluminium, steel and automobiles, the total effective US tariffs on Indian imports would rise to around 26.6pp (excluding the impact of the unspecified penalty for energy and military imports from Russia). It added: “We had previously estimated a potential direct impact of around 0.2pp to our CY25 India real GDP growth estimate, following President Trump’s 90-day pause on “reciprocal tariffs” above 10%. If the new tariffs are enforced, that would constitute a potential incremental drag of around 0.3pp (annualised). This estimate is based on India’s goods exports exposure of roughly 4% of GDP to US final demand and a goods export demand elasticity of ~0.5…”
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The agency also sees indirect impact through the “uncertainty channel” on domestic investment:
Elevated policy uncertainty in the US can cause Indian firms, particularly those exposed to US tariffs, to postpone investment decisions.” Goldman Sachs sees downside risks to its growth estimates for India for both CY25 and CY26.
IMF
Before President Donald Trump announced new tariffs for India, the International Monetary Fund and S&P Ratings had raised India’s growth estimate by 0.2 percentage points to 6.4% and 6.5%, respectively. The Reserve Bank of India and various domestic and global firms including rating agencies and brokerage had forecast India’s growth in the range of 6.2% to 6.5% for FY26.
The relative tariff advantage India held under the April round of announcements has now reversed, with India facing higher tariffs compared to several of its Asian peers, such as Vietnam (20%), Indonesia (19%), Philippines (19%) and South Korea (15%).
“Factoring in the higher reciprocal tariffs and additional penalty on India’s exports to the US, we estimate the potential impact on India’s GDP to be around 0.3-0.4%,” CareEdge chief economist Rajani Sinha said. “India is likely to remain cautious about opening up sensitive sectors such as agriculture and dairy, so the negotiations may take some time to conclude,” Sinha said.