US tariffs weigh on India's growth forecast and business confidence | cliQ Latest

India’s economic growth is expected to slow this fiscal year, with economists citing declining business sentiment and stalled private investment, partly due to proposed US tariffs. While headline figures remain relatively stable, concerns are deepening over job creation, rising uncertainty, and the country’s ability to meet its long-term development goals.

According to a Reuters poll conducted between April 15 and 24 among 54 economists, India’s GDP is projected to grow at 6.3% in the current fiscal year. This marks a slight downgrade from the previous estimate of 6.5% in March and represents a sharp decline from the 9.2% growth recorded in the previous fiscal year. The updated figure, however, still edges out the International Monetary Fund’s forecast of 6.2%.

Private investment stagnates despite infrastructure push

Despite the government increasing infrastructure spending, private investment has remained largely stagnant for over a decade. Economists believe this stagnation has significantly limited India’s economic potential and ability to generate quality employment. Millions of young people entering the workforce each year are struggling to find well-paying jobs, which has added to the anxiety surrounding the country’s economic direction.

The looming imposition of a 26% US tariff on Indian goods—though currently paused for 90 days—has added to the sense of uncertainty. Even though most of India’s US exports are in services, the proposed tariff has negatively impacted overall business sentiment, particularly in sectors already hesitant to expand.

Tariff fears shake investor confidence

When asked about the effect of US tariffs on India’s business sentiment, 60% of surveyed economists said the impact has been negative or very negative. Kanika Pasricha, chief economic advisor at Union Bank of India, noted that the investment climate has been particularly affected, with sectors like renewable energy, refineries, steel, and cement delaying capital expenditure plans.

Economist Kunal Kundu from Societe Generale emphasized the need for bold economic reforms, drawing parallels to India’s 1991 liberalization era. He said the current trade environment offers India a chance to reset and focus on structural improvements to unlock long-term growth.

Amid fears of a US recession and falling inflation at home, the Reserve Bank of India is expected to ease interest rates. Economists predict the key repo rate will be lowered to 5.75% in June and may drop further to 5.50% by August. Consumer inflation is projected to average 4.0% this fiscal year and rise slightly to 4.3% in the next.

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