- GDP loss from the 25% US tariff is unlikely to exceed 0.2 per cent, source said
- The government will not open agriculture or dairy markets to US imports
- Agriculture contributes less than 20% to India's GDP but employs nearly half of the population
The 25 per cent tariff announced by Donald Trump on Indian exports to the United States will have a 'negligible' impact on the economy, government sources told NDTV Friday afternoon.
The GDP loss is not likely to exceed 0.2 per cent, sources said, echoing what an India-based economist told Bloomberg (article behind paywall) - that GDP would likely slow by 0.3 per cent only.
A 0.2 per cent hit to GDP - Rs 330.68 lakh crore nominal in FY 2024/25 - is 'manageable'.
Sources also stressed the government will not bow to American pressure to open price-sensitive agriculture and dairy markets, or allow the import of beef or 'non-veg milk', i.e., milk from cows fed animal-based products like bonemeal. These may offend religious sentiments, sources said.
The government will also act to 'secure national interest' and remains committed to the welfare of farmers, entrepreneurs, and MSMEs (Micro, Small and Medium Enterprises), sources said.
READ | "Will Secure National Interest": India's 1st Response To US Tariff
Farmers merited a separate mention. NDTV was told the government would not compromise their interests, and would not, therefore, allow the import of GM, or genetically modified, crops.
The 25 per cent tariff was announced against the backdrop of stalled trade deal talks.
Those talks stalled because the US wanted its farmers and dairy producers to be able to sell in India.
READ | "Agriculture Issues Most Sensitive": US Ex Envoy On Interim Trade Deal
India has repeatedly said it cannot open these markets.
Agriculture and allied sectors contribute less than 20 per cent to India's GDP. However, nearly half the country's 144 crore population is either directly or indirectly employed in those sectors.
NDTV Explains | How Trump's 25% Tariff Will Impact Indian Markets
That makes it a massive vote bank no government can risk upsetting, a fact underlined by the ruling BJP being forced into rolling back three farm laws in 2021 after violent protests.
A stand-off over this topic reportedly angered Trump.
Hours before the 25 per cent was announced, he told US reporters, "India has been a good friend... but has charged basically more tariffs than almost any other country... you just can't do that."
Overall, the US is India's largest trading partner and has been so for four years now.
Bilateral trade in 2024/25 was valued at $132 billion.
READ | India, US Aim To Double Bilateral Trade To $500 Billion By 2030
In the last fiscal exports to the US rose by 11.6 per cent to $86.51 billion as against $77.52 billion in the preceding year. Imports, meanwhile, were up to $45.33 billion as against $42.2 billion in 2023-24.
Meanwhile, sources also said negotiations for the bilateral trade deal with the US - which has been in the works since November last year - are on track and 'moving in the right direction'.
A review of the 25 per cent tariff, and talks to reduce this, will be taken up after that deal is finalised, sources said. Last week NDTV was told India is close to finalising an interim deal.
READ | India-US Free Trade 'Mini Deal' Likely By October: Sources
An announcement is expected by September or October. There was hope such this could be worked out before the 25 per cent tariff takes effect - on August 7 - but now appears unlikely.
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