Chief Economic Adviser V Anantha Nageswaran on Monday cautioned that the 50 percent tariff imposed by the United States could reduce India’s GDP by 0.5 percent in FY26. Speaking to Bloomberg TV, he said the impact may climb to 0.6 percent if the measures remain in force for the entire financial year. While expressing hope that the duties will be short-lived, he warned that an extension into the next fiscal could bring a heavier drag and become a major risk to India’s growth momentum. The steep tariff announced by US President Donald Trump took effect on August 27. It combines a 25 percent secondary duty with an additional 25 percent penalty related to India’s imports of Russian crude oil.

Growth outlook: Despite the tariff pressure, Nageswaran maintained that India is positioned to achieve real GDP growth of 6.3 to 6.8 percent in FY26, broadly in line with government expectations. He highlighted that the economy grew by 7.8 percent in the first quarter, the fastest expansion in over a year, demonstrating resilience in the face of global headwinds.

GST reforms and fiscal position: Nageswaran further noted that the recent overhaul of the Goods and Services Tax could raise GDP by 0.2 to 0.3 percent. He added that India remains on track to meet its fiscal deficit target of 4.4 percent this year. The target will be supported by the Reserve Bank of India’s record dividend payout and government asset sales to cover shortfalls.

Finance Minister Nirmala Sitharaman recently announced sweeping GST reforms, cutting four existing slabs to a simpler two-tier structure of 5 percent and 18 percent, with a 40 percent rate on sin goods. The move delivers on Prime Minister Narendra Modi’s longstanding promise to simplify India’s indirect tax system.