GST Cuts to Cushion Impact of U.S. Tariffs on Indian Economy: CEA
India’s Chief Economic Advisor V. Anantha Nageswaran said on Wednesday that the recent cuts in goods and services tax (GST) announced by the government will help offset the impact of U.S. tariffs on the Indian economy. The move, initiated by Prime Minister Narendra Modi’s administration, is expected to boost domestic demand and provide a counterbalance to weaker export demand.
Nageswaran noted that the net impact of higher U.S. tariffs and lower domestic taxes will likely trim GDP growth by just 0.2 to 0.3 percentage points this year. India’s GDP growth for the current financial year is projected in the range of 6.3% to 6.8%. He stressed that GST reforms would “play a very good offsetting role, by substituting domestic demand for whatever the export demand that may not materialise from the United States.”
While the immediate effect of U.S. tariffs on Indian goods will be limited, Nageswaran cautioned that prolonged uncertainty over the 25% penalty duty imposed by Washington in response to India’s purchase of Russian oil could weigh on the economy. Policymakers are closely monitoring the situation to assess long-term implications for trade and growth.
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