Chief Financial Advisor V Anantha Nageswaran has warned that the extra 25 per cent tariff — taking the entire to 50 per cent — imposed by US President Donald Trump on Indian exports will make enterprise situations extraordinarily difficult and that the ripple results of this transfer are anticipated to be felt in financial progress, notably within the second and third quarters of the present monetary 12 months.
On the similar time, Nageswaran expressed confidence that the tariff measure could be shortlived and that there could be “sure recalibration taking place from the opposite facet” on it, because the “present strategy is just not going to be a long-term constructive factor by way of the general relationship”.
“I do really feel that it (excessive tariff) might be extra short-lived than long-lived,” Nageswaran mentioned.
Then again, he mentioned the discount in GST charges introduced by the federal government will increase consumption within the nation. “The query is whether or not it is going to be of a magnitude that may compensate for the export losses, is a special matter of calculations, however it would positively offset and compensate for that,” he mentioned on the Categorical Adda, organised by The Indian Categorical in Mumbai on Wednesday.
Nageswaran was in dialog with P. Vaidyanathan Iyer, Managing Editor, The Indian Categorical.
Categorical Adda with V Anantha Nageswaran, Chief Financial Advisor to the Authorities of India, in Mumbai on September 3, 2025. (Categorical Photograph by Sankhadeep Banerjee)
“This 12 months, you need to perceive that within the first 4 months, as much as August, exports have occurred with out the tariff. So the influence (of the extra 25 per cent tariff) this 12 months might be within the second half of the monetary 12 months. Estimates differ concerning the tariff-exempt and tariff-affected sectors,” he mentioned.
“You are able to do your calculations, however sadly you need to make a number of assumptions about second- and third-round results on uncertainty, capital formation, and employment. I feel there might be an influence on GDP progress within the second and the third quarters, assuming that the scenario continues,” Nageswaran mentioned.
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In keeping with him, the order of magnitude could possibly be anyplace between 0.3 per cent and 0.5 per cent this 12 months by way of actual GDP influence. The nation’s GDP rose to a five-quarter excessive of seven.8 per cent in the course of the April–June 2025 quarter. The Reserve Financial institution of India (RBI) has projected actual GDP progress for FY26 at 6.5 per cent.
The Chief Financial Advisor, nevertheless, mentioned that if the scenario stays unchanged, the total influence of the extra 25 per cent tariff might be felt subsequent fiscal. “So the fiscal second and third quarters might be vital, however I hope by then the second 25 per cent (tariff) would have been resolved. If it continues into the following monetary 12 months and lasts, that will be an enormous problem each by way of employment and GDP progress. Tough to present you exact numbers,” he mentioned.
For India, discovering different markets for its exports won’t be a straightforward job, with China – which can also be dealing with challenges with exports to the US and has the flexibility to finance patrons, supply lengthy lead instances for funds, and supply product and value reductions – competing for market share in third markets, he mentioned.
“In that sense, it does elevate the dependence on home levers of progress that rather more. So that could be a formidable job available for us,” the highest economist mentioned.
Greater tariff counterproductive
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When requested about causes for his optimism that the additional 25 per cent tariff could be short-lived, the Chief Financial Advisor mentioned there have been indicators that the US had realised {that a} increased tariff on India was in all probability not yielding the specified outcomes and was changing into counterproductive.
“If you happen to ask me for concrete proof past what I’m seeing in the previous couple of days by way of blended messaging, I don’t have a concrete foundation to present you a solution as to why I feel the second 25 per cent won’t final lengthy, however it is going to be extra short-lived than long-lived,” Nageswaran mentioned.
Requested concerning the steps India must take to mitigate the influence of upper tariffs, he emphasised that the nation has been specializing in issues that have been good for it somewhat than responding to tariffs. He mentioned that there was a rise in India’s purchases of gasoline and defence merchandise from the US and abroad direct funding made by Indian companies within the US over the past 20 years.
He additionally identified that issues have been moving into the best path so far as India’s engagement with the US is anxious. “If we proceed to do what we’re doing, I feel there might be sure recalibration taking place from the opposite facet in my opinion as a result of the present strategy is just not going to be a long-term constructive factor by way of the general relationship,” the Chief Financial Advisor mentioned.
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To a selected query on the steps the federal government can take to assist sectors affected by increased tariffs, Nageswaran mentioned an intervention program could possibly be designed to present them extra time by way of working capital, money flows, monetary fee forbearance, and likewise emergency credit score aid just like what was introduced in the course of the Covid pandemic.
On the similar time, Nageswaran mentioned, firms ought to begin pondering of simply recovering their marginal value of manufacturing in order that they will sustain with manufacturing and keep away from layoffs. “You (firms) can’t get better full value, however so long as you’re incomes a constructive contribution, your variable prices are coated. Then the federal government assist ought to allow you to tide over the part. As I imagine this (increased tariff) goes to be a short-lived phenomenon, I feel we must be okay,” he mentioned.
GST lower: Untimely to say states will lose out
When requested about states considerations over income losses attributable to GST fee rationalisation, Nageswaran mentioned, “We also needs to realise that in 2021, if we have been within the previous system, states wouldn’t have had any safety in any way with the GST collapse that occurred. Had they been within the previous system they usually have been accumulating their very own gross sales tax revenues, there would have been no backup for that, whereas the 14 per cent assure of GST gave them the cushion.”
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“I feel it’s untimely to say the states would lose out as a result of they haven’t misplaced out to date. We’re additionally not accounting for the likelihood that the speed discount may also spur extra financial transactions, which is able to compensate for the worth… It’s like a value versus quantity type of framework. It is going to be untimely to conclude or say that there’s a enormous danger of income loss for states,” Nageswaran mentioned.
There are a number of areas by which states can do extra on realising their very own tax revenues, he mentioned.