Tariffs May Cut GDP Growth in FY26 by Up to 60 bps: Experts

THE DONALD TRUMP administration's reciprocal tariff announcement could reduce India's economic growth by up to 60 basis points as against 6.5% forecast for FY26 by analysts and research organisations.

- FE BUREAU

Following the US tariff action, Morgan Stanley in a note said India's GDP growth could fall short of its 6.5% estimate by 30-60 bps in FY26.

"We see downside risks to growth both from the direct and indirect channels," economists Upasana Chachra and Bani Gambhir write in a note. "While the tariffs exceed our estimates for India, on a relative basis, these are at par/lower than other key competing economies".

On India, the reciprocal tariff rate set by the US is 27%, which while quite high, is lower than some other Asian countries such as China (34%), Vietnam (46%), Thailand (37%), Bangladesh (37%), Taiwan (32%), etc.