GST reforms seen offsetting tariff shock, GDP dip limited to 0.2-0.3%

India’s Chief Economic Advisor V. Anantha Nageswaran has weighed in on how potential U.S. tariffs might affect the country’s economy. Speaking on Wednesday, he noted that recent consumption tax reductions introduced by Prime Minister Narendra Modi’s administration could offset some repercussions from these trade measures. The lowered goods and services tax (GST) aims to boost local spending, providing a cushion for economic stability.

Nageswaran explained that GST adjustments would produce “compensating effects” to counterbalance higher U.S. duties. Even accounting for tariffs and reduced domestic taxes, he anticipates only a slight dip of 0.2%-0.3% in India’s GDP growth projections this year. The current financial year’s growth forecast remains between 6.3% and 6.8%.

The Economic Advisor stressed that GST modifications would help sustain economic momentum by shifting focus toward domestic consumption amid potential export challenges, especially to the U.S. While immediate tariff impacts this year may be minimal, he flagged ongoing risks from U.S. penalty duties—notably the 25% levy tied to India’s purchase of Russian oil—which could create long-term economic headwinds.

Looking forward, Nageswaran’s analysis suggests India must strategically balance global trade uncertainties with domestic reforms. The government’s ability to adapt policies to both stimulate local markets and navigate international pressures will be crucial for maintaining growth targets in the months ahead.