GST reforms, RBI support to cushion India’s growth risks: Rob Subbaraman

The annual Jackson Hole Symposium has once again set the tone for global markets, and this time the spotlight was firmly on U.S. Federal Reserve Chair Jerome Powell. His remarks have given markets enough confidence to believe that a September rate cut is almost certain.

Rob Subbaraman, Chief Economist at Nomura, told ET Now that Powell’s speech essentially confirmed market expectations for a 25-basis-point cut at the September FOMC. “Powell highlighted the Fed’s trade-off — upside risks to inflation versus downside risks to growth and employment. But he placed more emphasis on the growth risks, which markets took as a green light for easing,” he said.

Subbaraman noted that while a September cut looks likely, the Fed is not set on an aggressive easing path. “We don’t think the Fed will rush with 50 basis point cuts or slash rates at every meeting. Our forecast is three cuts — September, December, and March — totaling 75 basis points. That’s more cautious than markets expect, especially since inflation may stay sticky and the U.S. economy, in our view, will remain fairly resilient without tipping into recession.”

India: Between Tariffs and Reforms

Turning to India, Subbaraman pointed to the looming August 27 deadline for U.S. tariffs. “If enforced, this would effectively double tariffs on Indian goods to 50%, making exports unprofitable and hitting growth hard. Many investors still doubt the U.S. will follow through, but we see a real risk that it does,” he said.

However, he acknowledged India’s quick policy response. “The government has moved rapidly with measures like GST rationalisation, deregulation, and export subsidies to cushion the impact. We’ve trimmed our FY26 growth forecast from 6.2% to 6%, but even at that level, India’s economy shows resilience given the external shocks.”

On fiscal concerns, Subbaraman added that while some fear GST changes could widen the deficit, Nomura expects the government to prioritize macro stability. “We don’t see a significant fiscal slippage. Inflation, too, may remain subdued, giving the RBI room for two more rate cuts this year.”

China’s Decoupling and India-China Ties

Discussing China, Subbaraman highlighted a sharp slowdown risk in the second half of 2025. “We see growth dropping to about 4% as earlier demand was front-loaded, austerity measures kick in, and the property sector remains under stress,” he explained.

Interestingly, he noted that U.S. pressure may push India and China closer. “There are early signs — reports of Prime Minister Modi’s potential visit to China and possible resumption of direct flights. Economic ties could strengthen, particularly in exports and investment.”

Dollar Outlook: Emerging Markets May Gain

Finally, on the U.S. dollar, Subbaraman expects softness ahead. “With Fed cuts likely and the U.S. economy slowing, the dollar index should ease further in the second half. Foreign investors who have long favored U.S. assets may start shifting more flows toward emerging markets, which bodes well for countries like India.”