India’s growth to get at least 20-30 bps boost with US trade deal; GDP growth could cross 7% in FY27, say economists 

India’s weighted average tariff now stands at 10.7 percent, excluding Section 232 tariffs and exemptions, lower than most South Asian economies and on par with most Southeast Asian economies except Malaysia, which stands lower at 9.4 percent.

• India-US trade deal cuts tariffs, boosting Indian export competitiveness
• GDP growth may rise by 20-30 basis points due to lower US tariffs
• Labour-intensive sectors like textiles and gems to benefit most

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India’s GDP growth could get a meaningful boost of 20-30 basis points following the sharp reduction in US tariffs under the newly announced India-US trade deal, economists said, as lower duties help Indian exporters regain competitiveness in their largest export market.

US President Donald Trump announced on February 2 a trade agreement with India that cuts reciprocal tariffs to 18 percent from an earlier 50 percent. The move significantly alters India’s relative tariff position, placing it below key South Asian and Southeast Asian competitors that were earlier facing duties of around 19-20 percent.

Economists say the deal effectively frees up nearly $50 billion in Indian exports to the US from punitive tariffs, improving prospects for labour-intensive sectors such as gems and jewellery, textiles and marine products.

“The recently announced India–US trade deal is a positive development for India’s exports. A key highlight is that India has secured a lower tariff rate than competitors, including China, Bangladesh, Vietnam, Malaysia, Cambodia, and Thailand. Based on our estimates, this tariff reduction could add around 20 basis points to GDP growth in FY27,” said Sachin Gupta, Chief Rating Officer at CareEdge Ratings.

Gupta added that easing trade uncertainty could revive foreign investment inflows, stabilise the rupee and allow the Reserve Bank of India to reduce its recent heavy foreign exchange interventions, creating more room to manage liquidity and government borrowing through open market operations.

The Indian rupee on Tuesday rose to the highest level of 90.19 in three weeks.

Global investment banks have echoed this assessment. Goldman Sachs said it was raising its 2026 real GDP growth forecast by 20 basis points to 6.9 percent, citing reduced trade policy uncertainty. The firm noted that while private capex may take time to respond, the deal could lift investment sentiment in the second half of 2026.

According to Moody’s Ratings, the tariff reduction is credit-positive for labour-intensive export sectors, though pharmaceuticals and consumer electronics—already exempt from the earlier 50 percent tariff—are unlikely to see a direct impact.

Nomura estimated that the US effective tariff rate on India could fall to around 14.6 percent from 33.6 percent earlier, and projected FY27 GDP growth at 7.1 percent, above the current consensus of 6.6 percent.

The firm said the absence of a trade deal had weighed on portfolio and direct investment flows, and the agreement could trigger a decisive sentiment shift.

Barclays economists also see a strong macro tailwind. “Statistically speaking, we estimate lower tariffs will add around 30 basis points to headline GDP growth,” said Aastha Gudwani of Barclays, adding that the tariff cut reverses the growth threat posed by the earlier 50 percent duty regime.

The upbeat assessments reinforce the broader optimism flagged by India’s Economic Survey, which recently projected GDP growth of 6.8-7.2 percent for the coming year—well above the World Bank and International Monetary Fund forecasts of 6.4–6.5 percent—suggesting India could once again clock growth above 7 percent if external conditions remain supportive.

India’s weighted average tariff now stands at 10.7 percent, excluding Section 232 tariffs and exemptions, lower than most South Asian economies and on par with most Southeast Asian economies except Malaysia, which stands lower at 9.4 percent.

Indian exporters are expected to become competitive in categories like food, textiles and electrical equipment vis-à-vis these economies.