India-U.S. Tariff Resolution Expected Within Weeks, Boosts Economic Outlook
India’s Chief Economic Adviser (CEA), V. Anantha Nageswaran, shared an optimistic outlook on Thursday, anticipating a resolution to India’s tariff issues with the United States within the next eight to ten weeks. This comes after the U.S. imposed an additional 25% tariff on Indian products in August, primarily linked to India’s purchases of Russian oil, elevating the total levy to 50%.
During an interactive session hosted by the Bharat Chamber of Commerce in Kolkata, Nageswaran revealed that active conversations are underway between the two governments. “My hunch is that in the next eight to ten weeks, we will likely see a solution to the tariffs imposed by the U.S. on Indian goods,” he stated, acknowledging that persistent tariffs would inevitably lead to a decline in Indian exports to the U.S.
On India’s Economic Momentum
Describing India as an ambitious lower-middle-income economy, Nageswaran highlighted the impressive real Gross Domestic Product (GDP) growth of 7.8% recorded in the first quarter of the current financial year. He noted that India’s economic expansion has outpaced many other nations in the post-Covid-19 era.
Looking ahead, he projected that growth in the manufacturing, services, and agriculture sectors would significantly fuel economic progress over the next two years, with consumption and investments continuing to be key anchors for the country’s development. India’s debt-to-GDP ratio remains healthy, reflecting efficient utilization of capital as the country generates more GDP per dollar of debt compared to many other economies.
Furthermore, Nageswaran pointed out that rural demand continues to show resilience, while urban demand is steadily gaining traction. Recent reductions in GST rates are expected to increase disposable income, further boosting urban consumption. The MSME sector is experiencing a rise in credit, alongside structural shifts in advances to large industries, indicating diverse and ample avenues for resource mobilization.
The external sector of the economy also demonstrates resilience, despite global headwinds. Trade activity remains robust in the current financial year, supported by healthy foreign exchange reserves. The current account deficit is benign, having narrowed to just 0.2% of GDP in the first quarter of the 2025-26 fiscal year. While the rupee has seen some depreciation against the U.S. dollar, Nageswaran expressed confidence that, given the underlying strength of the economy, the rupee is likely to hold and even strengthen its value in the long run.
Delineating the government’s policy priorities, Nageswaran emphasized a continued focus on increasing government capital expenditure, providing incentives to stimulate private investment, and implementing systemic deregulation. He underscored that the expansion of physical infrastructure, including ports and airports, is crucial to prevent the economy from overheating as growth accelerates.
Regarding trade with China, the CEA noted that India primarily imports capital and intermediate goods from its neighbor. He urged the Indian private sector to enhance innovation and boost spending on research and development to foster domestic capabilities. On the impact of artificial intelligence (AI), Nageswaran observed that its effects have been marginal thus far. While coding-level jobs might face some threat, he believes it won’t negatively impact overall employment, stressing the importance of continuous upskilling for the workforce.