The current imbroglio caused by the 50% additional US tariff on India is expected to ease out in one to two quarters, chief economic advisor Anantha Nageswaran said at Emkay Confluence 2025 event here on Wednesday. “I don’t think from a long-term picture, the impact (of US tariff on the Indian economy) will be that significant but in the short-term, there may be some impact,” he added.
Last week, US President Donald Trump signed an executive order imposing an additional 25% levy on India for purchasing Russian oil, bringing the total extra tariff to 50%. While the initial 25% tariff came into effect on August 7, the additional 25% linked to India’s imports of Russian oil is set to take effect on August 27.
In the meantime, India and the US haven’t yet formally ended the negotiations for a bilateral trade agreement. A US team is still expected to visit India on August 25 to take forward the talks to the sixth round. Also, US president Donald Trump and Russia’s Vladimir Putin are slated to meet in Alaska on August 15, to discuss how to end the war in Ukraine.
Economic Momentum Holds Firm
Nageswaran said that the government is in talks with exporters hit by the US tariffs and a response will be forthcoming. He said a lot will depend on the Trump-Putin meeting in Alaska and the meeting of the US Team with Indian delegates on August 25.
Despite the US imposing additional 25% tariffs on India, the economic momentum has not slowed down, he said. “I can say that there are multiple indicators which actually point to the fact that it (economic growth) isn’t slowing down,” he said.
While talking about employment, he said that it is extremely important how we allow artificial intelligence (AI) to be deployed and harnessed and also the speed with which we do so.
Technology and Security Challenges
In terms of semiconductors and AI, Nageswaran said we still have a lot of catching up to do. “If we are going to compete with the US and China, we have lots of work to do, even in the areas of security, because more with respect to the technological capabilities and the physical resource investment required, we have a long way to catch up.,”
He added that the trade related issues should not overshadow the real challenges such as energy transition, energy security, and the need for public-private collaboration.
Robust domestic demand and services activity helped the Indian economy sustain its growth momentum in the first quarter of FY26, but slow credit growth, weak private investment and continued uncertainty on the US tariff front may restrict acceleration in economic momentum, the finance ministry had said in its latest monthly report. Aided by robust domestic demand, fiscal prudence and monetary policy support, India appears poised to continue as one of the fastest-growing major economies, with various forecasters, including S&P, ICRA, and the RBI’s Survey of Professional Forecasters, projecting GDP growth rates for FY26 in the range of 6.2% and 6.5%. Many analysts have estimated the FY26 growth may be shaved off by 40 to 100 basis points if the 50% US tariff over MFN rates take effect and remains through the year.