Nagging uncertainty clouds future

The recent India-UK trade agreement is expected to boost India’s exports, particularly in textiles and pharmaceuticals. However, a challenge has emerged as President Trump announces imposing a 25 per cent tariff on Indian goods, with an unspecified penalty clause, effective October 7.

- Dhurjati Mukherjee

Though the deal is yet to be discussed and finalised, the American move could put India at a disadvantage compared to other low-cost exporters like Vietnam, Indonesia, and the Philippines.

Several sectors are currently exempt from the reciprocal tariffs, including oil and petroleum products, active pharmaceutical ingredients, smartphones, and electronic goods. The recently published “State of Economy’ report by the Reserve Bank of India (RBI) raises concerns about potential challenges facing India’s economic outlook. Some economists note that in the absence of a final deal within two to three months, there could be a measurable impact on fullyear GDP growth estimates for India. Conversely, some analysts believe that, given the economy’s reliance on domestic demand, overall growth may remain relatively stable.

According to the RBI report, the future trajectory of the economy faces uncertainty due to both global and domestic factors. If the report had been released after the announcement of the US tariffs, the tone might have reflected additional negative pressures. The report highlights positive prospects for the kharif crop owing to widespread rainfall, while industrial growth is described as modest. It also notes that industrial activity has weakened, with production dropping to a nine-month low in May and demand indicators remaining subdued.