India's economic resilience is strong enough to withstand the shock of the 25% tariffs imposed by the United States, according to a recent analysis by the PHD Chamber of Commerce and Industry (PHDCCI). While the tariffs, enacted by U.S. President Donald Trump, will impact approximately $8.1 billion worth of Indian exports, the overall effect on India's economy is expected to be manageable.
The PHDCCI estimates that the tariffs will have a limited impact of 1.87% on India's total global merchandise exports, and a negligible 0.19% on India's GDP. This assessment suggests that India's diversified economy and robust domestic demand will help to absorb the shock. The industry body anticipates India will continue to be the fastest-growing major economy, with the International Monetary Fund (IMF) projecting a growth of 6.4% in 2025–26. Deloitte projects a similar growth between 6.4% and 6.7% in fiscal year 2025-2026.
Several sectors are expected to be particularly affected by the tariffs. These include engineering goods, with an estimated impact of $1.8 billion, followed by electronics at $1.4 billion, pharmaceuticals at $986 million, gems and jewelry at $932 million, and apparel at $500 million.
To mitigate the fallout from the tariffs, the PHDCCI has proposed a four-pronged strategy. This includes negotiating bundled pricing with major U.S. retailers like Walmart and Amazon, developing premium variants of export products, redirecting trade volumes to other markets such as the EU, Canada, and Latin America, and encouraging joint ventures for on-shore production in the U.S.. Hemant Jain, president of PHDCCI, stated that the tariff challenge accelerates India's need for export sophistication and geographic diversification and provides a roadmap for converting this disruption into an opportunity for long-term competitiveness enhancement. Ranjeet Mehta, CEO and SG of PHDCCI, emphasized that India's strong domestic demand and diversified economy provide a crucial buffer against external pressures.
This assessment offers a more optimistic view compared to some other projections and suggests that India's domestic resilience and economic diversification will help absorb the shock. The PHDCCI analysis, released today, suggests that the 25% tariff will have a limited effect on India's overall economy.
Amidst these trade tensions, Reserve Bank of India (RBI) Governor Sanjay Malhotra has countered claims that India's economy is struggling. He asserted that India is contributing about 18% to global growth, which is significantly higher than the U.S.'s estimated 11%. The RBI projects India's GDP growth at 6.5% for FY25, which is well above the International Monetary Fund's global growth estimate of 3%.
Several reports suggest that India's macroeconomic fundamentals have shown remarkable resilience. Growth for the full fiscal year came in at 6.5%, driven by strong private consumption expenditure and investments, indicating domestic demand might be more resilient than expected, supported by easing inflation and favorable conditions in rural economies. India's retail inflation dropped to 2.1% in June 2025, the lowest since January 2019, due to a decline in food and oil prices. The current account balance moved into a surplus of 1.3% of the GDP in Q4 FY 2024–25, the highest in four-and-a-half years. India's services trade surplus increased to $15.3 billion in June 2025, reaching its highest level, driven by robust IT and consulting exports.
Despite the challenges posed by the US tariffs, India's economic outlook remains positive, buoyed by a resilient consumer base, a broadening investment landscape, and a digitally skilled, dynamic workforce. Strategic trade negotiations with the United Kingdom and the European Union are expected to further boost income, jobs, market access, and domestic demand.
