Goldman Sachs has projected an annual 0.6 percentage point impact on India’s GDP growth after the United States announces an additional 25 per cent tariffs on Indian products.
Earlier, when the United States levied a 25 per cent tariff on Indian imports, Goldman Sachs had projected a 0.3 percentage point effect on India’s GDP growth.
Goldman Sachs said that if India and the US fail to negotiate a deal before August 27, and the United States goes ahead with an additional 25 per cent tariff, the effective average tariff rate would be 32 per cent due to the exemption of several products.
Additionally, the banker added that in the calendar year 2025, the direct effect of tariffs on India’s GDP growth would be 0.1 percentage points as the added tariffs start late in the year.
India’s GDP exposure to US exports: Goldman explains
Goldman Sachs states that India’s GDP exposure to US exports stands a 4 per cent. Simply put, India’s exports to the United States account for 4 per cent of its GDP growth. A major impact on Indian exports to the US has direct implications on the country’s GDP growth.
Further, Goldman Sachs adds that the average exposure of India’s GDP after taking the exemptions into account would be about 3.8 per cent. However, the current uncertainties around the trade deal between the two countries also have an indirect effect on India’s GDP growth.
Current Status of tariffs
The additional 25 per cent tariff announced by the United States will come into effect on August 27. This will be above the existing 25 per cent tariff announced on July 31. Several sectors, such as gems, jewellery, textiles, carpets, footwear, shrimp and engineering machinery, will bear the highest brunt of the tariffs.
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