25%+25% US tariffs may lower India's growth by 0.7 pp over 1 yr: HSBC

The growth drag may rise to 0.7 pp with a 50-per cent tariff, the report, titled 'India Economics: Clouds lifting, or just shifting?' noted.

"The 25 per cent + 25 per cent tariff rates imposed by the US authorities on India’s exports (starting 27 August as of now) have dimmed some of the growth prospects," it said.

The United States had imposed an additional 25 per cent penalty on India for importing crude from Russia.

Around a fifth of India’s total exports go to the United States. A 50-per cent tariff could lower growth, the report said.

Many of the affected export items, including textiles, are manufactured in labour-intensive small firms, and therefore, disruptions will impact domestic consumption, it said.

If the export outlook weakens, it may also reduce foreign investment and slow corporate spending, which forms 12 per cent of gross domestic product (GDP), it noted.

The tariff outlook remains uncertain, depending on US-Russia-Ukraine peace talks and India-US trade negotiations. Global developments involving Presidents Donald Trump, Vladimir Putin and Volodymyr Zelenskyy will determine the impact of the oil penalty, it added.

ALCHEMPro News Desk (DS)