India Explores Measures to Counter U.S. Tariff Hikes: DEA Secretary

Quick Summary

• US Tariff Impact: The US has imposed a steep 50% tariff hike on Indian shipments, perhaps affecting employment-heavy sectors.India is assessing impacts and planning mitigation measures.
• Domestic Support Measures: Steps to boost domestic demand include zero income tax for incomes up to ₹12 lakh under a new tax regime and GST rate rationalization to lower commodity prices.
• Fiscal Deficit Target: Despite reaching 29.9% of the full-year target by July, Economic Affairs Secretary Anuradha Thakur remains confident that India will meet its fiscal deficit goal of 4.4% (₹15.69 lakh crore) for FY 2025-26.
• Economic Growth Performance: India’s GDP growth reached 7.8% in April-June, driven by manufacturing, construction, services, agriculture sectors, and robust domestic demand.
• Global Comparison: India continues leading as the fastest-growing major economy against other nations like China (5.2% GDP growth across the same period).

Indian Opinion Analysis

The significant tariff hikes imposed by the US pose challenges but also offer an opportunity for policy recalibration in India’s trade strategy with global partners. The government’s efforts to amplify domestic demand through fiscal incentives like reduced taxes could bolster local consumption and manufacturing within affected industries.Meeting fiscal targets amidst rising deficits requires effective budget control; Ms.Thakur’s confidence signals potential strategies addressing mismatched spending yet maintaining macroeconomic stability as reflected in positive Q1 indicators like private consumption and capex trends.

India’s notable GDP performance reaffirms its role as a global leader in economic resilience-sustained through diversified sectoral contributions-and offers compelling evidence of well-functioning policy frameworks keyed into strong fundamentals despite external pressures such as tariffs or fluctuating international market conditions.Read more