The Goldman Sachs report emphasized the potential impact of American tariffs on Indian gross domestic product (GDP). The report suggests that Indian GDP could be influenced by 0.1 to 0.6 percentage points if the US administration, President Donald Trump, decides to increase tariffs to all US imports to match the average difference between India and the US.
“The Indian exhibition in domestic activities of the US final demand would be about twice as higher (4.0 % of GDP) due to the US exports to other countries and would probably lead to the potential domestic impact of domestic GD growth 0.1-0.6pp. “The report stated.
The report also explains that within the Reciprocity level where tariff rates for each product are associated with those selected by business partners, the weighted average tariff rate in Indian import could increase by 6.5 to 11.5 percentage a point. This increase would depend on the type of mutual tariff plan of the received US.
“Indian domestic value added content in gross exports to ~ 4.0 % of GDP is roughly in the middle among its Asian peers. According to this metric, the potential impact of the growth of domestic GDP (from 6.5-11.5pp increases the average effective rate of tariffs in the US) probably ranged from ~ 0.1-0.6pp, ”the report said.
Goldman Sachs also noted that non -tariff barriers such as import licenses and export subsidies are a complex challenge. These barriers are difficult to estimate for every business partner, which leads to focus only on customs tariff barriers. Indian exports to the US currently account for approximately 2 percent of its GDP, which is relatively low compared to other developing markets. Yet higher American tariffs could still significantly affect the domestic economy of India.
The report adds that if the US uses global tariffs in all countries, the impact on India would be more important. This scenario would probably increase the exposition of Indian final demand in the US to approximately 4 percent of GDP due to India exports to other countries that in turn export to the US.
The Indian surplus of bilateral goods with the US has doubled over the last decade and reached $ 35 billion (1 % of Indian GDP) in FY24. This growth was primarily driven by electronics, pharmaceutical products and textiles. Indian rates are generally higher than in the US for most products, especially in agricultural products, textiles and drugs.
President Trump emphasized a new commercial policy focused on justice and reciprocite and states that the US would introduce mutual tariffs to accounting other countries of the same tariffs as they store on US goods.
