US Tariffs to Weigh on India's Economic Growth, Prompting Rate Cuts

US Tariffs to Hit India's GDP Growth, Prompt More Rate Cuts

The ongoing trade tensions between the US and India are likely to have a significant impact on the country's economic growth, with the US tariffs expected to reduce India's GDP growth by 0.2-0.3 percentage points, according to a report by the Centre for Monitoring Indian Economy (CMIE).

The report, which was released last week, suggests that the US tariffs on Indian goods, which were imposed in June, will have a negative impact on India's economic growth, particularly in the manufacturing sector. The tariffs are expected to reduce India's GDP growth by 0.2-0.3 percentage points, which would translate to a reduction of around 0.4-0.6 percentage points in the country's GDP growth rate.

The report also suggests that the US tariffs will prompt more rate cuts by the Reserve Bank of India (RBI) to stimulate the economy. The RBI has already cut interest rates by 0.25 percentage points in August, and another rate cut is expected in the coming months.

The report also highlights the impact of the US tariffs on India's exports, which are expected to decline by around 10-15% in the current fiscal year. The decline in exports is expected to be particularly pronounced in the manufacturing sector, which is expected to decline by around 15-20%.

The report also suggests that the US tariffs will have a negative impact on India's fiscal deficit, which is expected to increase by around 0.2-0.3 percentage points of GDP. The increase in the fiscal deficit is expected to be driven by the decline in exports and the increase in imports, which is expected to lead to a decline in the country's current account deficit.

The report concludes that the US tariffs will have a significant impact on India's economy, and that the country needs to take steps to mitigate the impact of the tariffs. The report suggests that the government needs to focus on improving the business environment, increasing investments in infrastructure, and promoting exports to other countries to reduce the country's dependence on the US market.