India defies tariffs with strong growth and global alliances

India’s economy is showing remarkable resilience at a time of mounting external challenges, with punitive tariffs from the US failing to derail its growth momentum.

- Issac John

Despite Washington’s doubling of duties on Indian goods, the country remains the world’s fastest-growing major economy, with GDP projected to expand by 6.5 per cent in FY26. The latest data reinforce the picture of an economy that has not only absorbed external shocks but continues to consolidate its long-term growth trajectory.

The tariff blow has been significant in trade terms. August exports to the US fell to $6.7 billion, down 16.3 per cent from July and marking the steepest monthly fall of 2025, according to think tank GTRI. The sharp contraction followed earlier declines of 3.6 per cent in July and 5.7 per cent in June as the impact of 50 per cent tariffs began to weigh on competitiveness.

Economists argue that these setbacks have not yet dented India’s overall growth narrative. GDP for Q1 FY26 expanded 7.8 per cent, a five-quarter high and well ahead of most forecasts, following 7.4 per cent growth in the previous quarter. This performance came despite global market volatility and directly contradicts US President Donald Trump’s controversial labelling of India as a “dead economy.”

India’s inherent strengths are cushioning the impact of tariff headwinds. Strong domestic consumption, which accounts for nearly 60 percent of GDP, remains the backbone of growth, while services and manufacturing continue to expand. The government’s push on infrastructure and reforms has further entrenched these buffers.

According to S&P Global, India’s long-term trajectory remains intact, with reforms in taxation, insolvency, and digital systems providing a competitive edge over advanced economies struggling with sluggish growth.