India likely to meet 6.3-6.8% growth forecast for FY26 despite US tariffs

India is likely to achieve its projected 6.3-6.8% economic growth in 2025-26, even as it assesses the potential impact of the global trade war and a financial market slide in the aftermath of the Trump administration's "reciprocal tariffs" last week, senior officials said on Monday.

The growth projection, firmed up in the Economic Survey in late January, had factored in the impact of some external headwinds. But the latest US move on imposition of reciprocal tariffs has necessitated a fresh assessment once the precise impact of the global tariff war on India's exports and the broader economy becomes clear, the officials said.

The US has announced a 26% tariff on its imports from India, which would kick in from April 9.

The government is also sticking to its budget estimate of a 10.1% nominal economic expansion in this financial year, said one of the officials, who did not wish to be identified. "It's too early to have a realistic assessment of the situation that is dynamic. But as things stand now, it's unlikely that India's (real) growth will slip below 6.3% this fiscal."

Growth in 2024-25 may have touched 6.5%, as per the government's second advance estimate in late February.

A good trade deal between India and the US, relative tariff advantage for India vis-a-vis rivals and an expected further moderation in global commodity prices, especially of energy, would be positive for India's growth, the official said, even as he conceded that downside risks from trade uncertainties remain.

Goldman Sachs on Sunday trimmed its 2025 and 2026 India growth forecasts by 30 basis points (bps) and 20 bps, respectively, to 6.1% each. Nomura has now projected India's growth rates at 6.2% and 6% for 2024-25 and 2025-26, respectively. A basis point is a hundredth of a percentage point.

Some others, including those at HSBC and UBS Securities, expect the fresh tariffs and related turmoil to shave 20-50 basis points off India's growth this fiscal.

They, however, have predicted lower impact if India can secure a favourable trade deal with the US for which negotiations are in progress.

Besides, as Nomura said in a report, Vietnam's loss could be India's gain. "The next round of supply-chain shifts will likely benefit India the most, helped by its strategic alliance with the US, and higher relative tariff rates on competitors like Vietnam." It further said, "Meanwhile, there is scope for trade diversion in the short-term, with lower-tariff countries poised to benefit."

While India faces a 26% tariff, China has been slapped with 34% tariff (54% if earlier 20% duty is added), Vietnam 46%, Bangladesh 37%, Thailand 36% and Indonesia 32%. China's retaliatory 34% tariff on the US last week exacerbated global trade uncertainties.

The government is particularly sensitive about the impact on labour-intensive sectors such as agriculture, textiles and garments, and gems and jewellery, according to officials.