India’s real GDP growth is unlikely to fall below 6 percent in FY26, supported by a favourable monsoon and expectations of crude oil prices staying well below $75 per barrel, which would help cushion the economy from the impact of steeper US tariffs on Indian exports, a senior government official told Moneycontrol.
“Benign oil prices, good monsoon are a couple of offsetting factors that will help despite the tariffs, keeping growth above 6 percent rather than below 6 percent as things stand now,” the official said.
While global oil prices like Brent crude hovered around $66 per barrel, most parts of India have received normal rainfall, leading to Kharif sowing picking up pace, supported by the strong advancement of the South West monsoon.
“All things considered, the tariffs may impact .3 percent or .4 percent in terms of growth. The direct impact would be .2 to .3 percent. Any estimate would be subject to many uncertainties. Before the extra 25 percent tariff, be it the IMF or the RBI, growth was seen at 6.5 percent, but now there are more downsides to that,” the official explained.
The Economic Survey for 2024-25 said that growth in FY26 is likely to be between 6.3 and 6.8 percent.
While the Reserve Bank of India retained its growth forecast of 6.5 percent in the current fiscal, it was hours before Trump levied another 25 percent on most Indian goods, citing New Delhi’s purchases of Russian crude oil. The additional duty kicks in from August 27.
Tariff impact
Trump first levied a 25 percent tariff on India as talks for a mini-version of a trade deal to avert reciprocal duties failed, starting August 7.
On August 11, the finance ministry said that around 55 percent of Indian merchandise exports to the US will be subject to 25-percent reciprocal duties. India exported goods worth $86.51 billion to America in FY25.
Some of the worst affected sectors are labour-intensive products like textiles, gems and jewellery, as well as marine products, notably shrimps.
To be sure, GDP growth could be higher if India and the US agree to a deal, potentially lowering the tariffs on India that are currently at 50 percent, this official added.
India and the US are presently negotiating a Bilateral Trade Agreement, the last round of talks for which was held in July, the commerce ministry told Lok Sabha on August 12.
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