Despite Trump tariffs, India’s FY26 GDP growth may touch 6.5% on benign oil prices: Govt official

US President Donald Trump and Prime Minister Narendra Modi

India’s GDP (gross domestic product) growth is likely to touch at least 6.5 percent in FY26 as global oil prices are expected to remain below $70 per barrel, compensating a potential slowdown in exports following the reciprocal tariffs imposed by the US, a senior government official said.

“Oil prices have been hovering way below $70 billion per barrel and it is expected to stay around that level. So can still expect growth to be around 6.5 percent as outlined in the Economic Survey,” he said.

Oil prices slid to a nearly four-year low in the wee hours of April 7 on concerns around a slowdown in demand for the commodity due to an intensifying trade war between the US and China.

Global benchmark Brent dropped by almost 4 percent to $63.21 a barrel after slumping 11 percent last week, while West Texas Intermediate was at $59.79 a barrel.

A second government official said that India’s 2025-26 budget took into account global uncertainties on the trade front stemming from the Trump administration's policies.

“A lot of people, at the time, were telling us that (nominal) growth projection could have been kept at 10.4 percent, but we went with 10.1 percent. We had factored in global uncertainties, including on the trade front, and we can at most go to 10 percent from 10.1 percent," this official said.

Finance minister Nirmala Sitharaman pegged India’s nominal growth at 10.1 percent for FY26. While this was higher than 9.7 percent in the previous fiscal, it was significantly lower than the 10.4 percent predicted by most economists.

Following US President Donald Trump’s move to impose a 26 percent reciprocal tariff on India, many economists have predicted a downward pressure of 30-40 basis points on the country’s real GDP growth prospects in the current financial year versus their earlier forecasts.

Barclays expects the new tariffs to exert a 30-basis point downside risk to its GDP growth forecast of 6.8 percent for 2025-26.

Trump has the authority to increase tariffs if trading partners retaliate, or decrease tariffs if they take significant steps to remedy non-reciprocal trade arrangements.

However, Goldman Sachs sees a larger hit to Indian exports due to the US’s sweeping tariffs and therefore downsized the country’s GDP growth forecast for FY26 to 6.1 percent.

The Economic Survey for 2024-25 expects India’s economy to grow at 6.3-6.8 percent in the current financial year, citing downside risks from global headwinds which will require careful navigation.

The Survey, though, noted that the fundamentals of the domestic economy remain robust, with a strong external account, calibrated fiscal consolidation and stable private consumption.