New Delhi: The impact of US tariffs on India’s economic trajectory has become a significant point of discussion. Finance Secretary Ajay Seth’s recent remarks at the Hudson Institute, delivered during the IMF and World Bank spring meetings in Washington, highlight the potential ramifications. Seth projected a reduction in India’s GDP growth rate of between 0.2 and 0.5 percentage points as a direct consequence of these tariffs. This projection underscores the vulnerability of the Indian economy to global trade dynamics and the far-reaching consequences of protectionist policies.
The significance of Seth’s statement lies not only in the immediate impact on GDP growth but also in his emphasis on “second-order effects.” These secondary consequences refer to the wider ripple effects of trade tensions on global growth. Slowdowns in other economies can reduce demand for Indian exports, further impacting its growth rate. This interconnectedness necessitates a holistic approach to managing economic risks.
Despite the challenges posed by these tariffs, Seth expressed optimism about India’s long-term growth prospects. He suggested that a 7% annual growth rate was achievable over the next decade. However, he simultaneously highlighted the need for a faster rate of expansion to meet India’s ambitious long-term development targets. This indicates a recognition that maintaining a competitive global position requires exceeding the projected average growth.
Furthermore, Seth clarified that the Indian delegation’s participation in the IMF/World Bank meetings did not include a focus on further trade negotiations with the US administration. While he declined to provide details about the delegation’s specific agenda, this statement suggests a shift in strategic priorities. Instead of prioritising immediate trade negotiations, the Indian government may be focusing on longer-term economic strategies and strengthening domestic resilience.
The situation necessitates continued monitoring of both the immediate impact of tariffs and the longer-term effects on India’s economic trajectory. The ability of the Indian government to mitigate these challenges and maintain a robust growth rate will be crucial in achieving its long-term development goals.
