US President Trump announced 25% reciprocal tariff on India along with an unspecified penalty rate for importing arms and energy items from Russia.
Download ReportQuantEco Research || US tariff on India: Gauging the preliminary impact
Trade negotiations between India and the US continue to remain in place. The imposition of 25% tariff would potentially lower India’s annualized export by USD 31 bn on gross basis (7.0% of total merchandise exports and 0.7% of GDP). We also estimate gross gains of a similar magnitude on account of tariffs on other countries, which would result in strategic increment in India’s market share for certain products. Overall, the net impact from reciprocal tariffs on India’s exports could be negligible Since our FY26 GDP growth forecast of 6.4% incorporated this backdrop, we retain the same. Our other macro calls for FY26 also remain unchanged for now: CPI inflation at 3.0%; Central government’s fiscal deficit of 4.4% of GDP; Current account deficit of 0.8% of GDP accompanied by a BoP surplus of USD 10 bn.
Our call on interest rates - 25 bps cut in the repo rate Aug/Oct policy review and 10Y g-sec yield of 6.20% by Mar-26 also remain unchanged. We continue to expect INR to weaken towards 89.5 levels by Mar-26 on a recovery in the USD sentiment and elevated global geoeconomic and geopolitical uncertainties. Risk to watch: Unspecified penalty over and above the reciprocal tariff of 25%.