FILE PHOTO: A general view of residential buildings amidst the coastal road construction work in Mumbai, India.
Credit: Reuters
New Delhi: Uncertainty about the duration and frequent changes in tariffs by US President Donald Trump's administration will hinder investments and economic growth of India, Crisil said on Monday.
The rating agency said that the US tariff policy is a key risk to India’s GDP growth in the current financial year. “Slower global growth, along with anticipated reciprocal tariffs on India after three months, is likely to hit exports,” it said.
On April 2, Trump announced the imposition of additional steep taxes on imports from 60 countries, including India. The additional tariff announced on India is 26 per cent. However, within a week the White House announced suspension of the additional tariffs for 90 days. Several agencies including the Reserve Bank of India (RBI) and Moody’s have cut India’s economic growth projection citing the negative impact of the US tariffs.
Crisil has pegged India’s gross domestic product (GDP) growth for the current financial year at 6.5 per cent with “risks tilted to the downside.” Crisil’s projection is in line with the economic growth estimate of the RBI.
In its monetary policy announcement the RBI earlier this month lowered India’s GDP growth projection for 2025-26 to 6.5 per cent, which is 20 basis points lower when compared with the central bank’s estimate announced in February.
Industrial growth as measured by the Index of Industrial Production (IIP) slowed to 2.9 per cent in February from 5.2 per cent in the previous month, as per data released by the National Statistics Office (NSO) last week.
IIP growth has been volatile in the past few months. On average, IIP growth stood at 4 per cent in the fourth quarter as of February, broadly in line with the 4.1 per cent recorded in the December quarter.
With data now available for eleven months, the underlying momentum within sub-sectors IIP can be highlighted, Crisil said in a note.
IIP manufacturing performed better on average in the second half of 2024-25, led by good performance in the sectors like petroleum products, machinery and textiles.
Improved growth in capital, infrastructure and construction goods’ output in the second half points at a gradual pick-up in construction and capital expenditure activity in the latter part of the fiscal, Crisil said.
“Other high-frequency indicators show growth prospects improving in the fourth quarter,” it added.
The latest RBI Consumer Confidence Surveys indicates an improvement in March, in both rural and urban areas. The RBI Quarterly Industrial Outlook survey also shows a sequential strengthening in demand in the fourth quarter.
All these factors corroborate recovery in domestic demand. Healthy rabi output and easing inflation in the fourth quarter also bode well for consumption demand, Crisil said.