India's GDP Faces 0.5% Hit as U.S. Tariff Slashes Exports by 150 Billion Dollars

The impact of the 50% tariff imposed by the United States on India is becoming increasingly evident, with the chief economic advisor of India warning that the country's GDP could be reduced by 0.5%. This tariff, which is seen as a punitive measure, is expected to significantly affect international expectations for U.S.-India economic cooperation. The tariff is likely to result in a sharp decline in India's exports to the U.S., with the technology sector being particularly hard hit. Estimates suggest that India's exports to the U.S. could decrease by approximately 150 billion dollars, which would have a substantial impact on the Indian economy. The chief economic advisor has cautioned that this reduction in exports could lead to a 0.5% decrease in India's GDP, highlighting the severe economic consequences of the tariff. The situation underscores the delicate nature of U.S.-India trade relations and the potential for further economic repercussions if the tariff remains in place.

This tariff was imposed in response to India's purchase of Russian oil, which the U.S. government alleges is indirectly supporting the Russia-Ukraine war. The U.S. government doubled the tariff on Indian imports to 50% last month, citing India's oil trade as a form of support for the conflict. The bilateral trade in goods between the U.S. and India reached 129 billion dollars in 2024, with the U.S. facing a trade deficit of 45.8 billion dollars.

In response to the pressure, the finance minister emphasized the continued purchase of Russian oil, citing its affordability as crucial for controlling inflation. Despite the tightening external environment, the government maintains its annual growth forecast of 6.3% to 6.8%, based on the strong 7.8% growth in the second quarter, which is the fastest expansion in nearly a year. The chief economic advisor noted that the impact of the tariff on the remaining period of the current fiscal year, which ends in March 2024, is expected to reduce the actual GDP growth by 0.5% to 0.6%.