Kolkata: India may be closer to resolving its ongoing tariff dispute with the United States, as Chief Economic Adviser (CEA) V. Anantha Nageswaran expressed confidence on Thursday that a breakthrough could come within the next eight to ten weeks.
Speaking at an interactive session organised by the Bharat Chamber of Commerce, Nageswaran revealed that talks between New Delhi and Washington were actively progressing behind the scenes. “Underneath the surface, conversations are going on 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 US on Indian goods,” he said.
Tariff Dispute Background
The current trade friction stems from the US decision to impose an additional 25 per cent tariff on Indian goods in August, in response to India’s continued purchases of Russian oil. This latest measure doubled the overall levy on certain Indian exports to as much as 50 per cent.
Nageswaran warned that if these tariffs remain in place for a longer period, they could have a dampening effect on India’s exports to the American market, which remains a crucial destination for Indian goods.
India’s Economic Performance
Despite the trade challenges, the Chief Economic Adviser painted a broadly optimistic picture of the Indian economy. He described India as an “aspirational lower-middle-income economy” that has shown remarkable resilience in the post-pandemic period.
Real GDP growth for the first quarter of the current fiscal year was recorded at 7.8 per cent, outpacing several major economies. According to Nageswaran, growth in manufacturing, services, and agriculture would provide a strong foundation for India’s progress over the next two years.
Consumption and investments, he said, would continue to anchor growth, while government capital expenditure and policy incentives are expected to spur private investment.
Debt, Demand and GST Relief
On the fiscal side, Nageswaran noted that India’s debt-to-GDP ratio remained at a healthy level. “With every US dollar of debt, the country generates more GDP than many other nations, which shows efficient utilisation of capital in the economy,” he explained.
He also pointed to resilient rural demand and strengthening urban consumption, aided recently by relief in GST rates. “The reduction in GST will leave more disposable income in the hands of consumers, and this is likely to push up urban consumption,” the CEA remarked.
Meanwhile, credit flow to the Micro, Small and Medium Enterprises (MSME) sector is on the rise, while lending patterns in large industries are undergoing structural change. “In the present day, avenues of resource mobilisation are ample,” he added.
External Sector and Currency Outlook
Nageswaran also highlighted India’s robust external sector despite global headwinds. Trade activity has been strong during the ongoing fiscal year, foreign exchange reserves remain comfortable, and the current account deficit narrowed sharply to just 0.2 per cent of GDP in the first quarter of FY 2025-26.
He acknowledged that the Indian rupee has been depreciating against the US dollar but emphasised confidence in the currency’s long-term outlook. “Given the underlying strength of the economy, I am more inclined to believe that in the longer run, the rupee is likely to hold its value and become stronger,” he said.
Policy Priorities and Structural Challenges
Outlining the government’s policy priorities, Nageswaran stressed continued emphasis on infrastructure expansion, deregulation, and incentives for private investment. The development of ports, airports, and other physical infrastructure, he said, will help India absorb higher growth without overheating the economy.
On trade with China, he pointed out that India continues to import mostly capital and intermediate goods. For India to reduce this dependency, he called on the private sector to step up innovation and invest more in research and development.
Technology and Future of Jobs
The CEA also touched upon the impact of artificial intelligence (AI) on India’s workforce. He said the disruption has so far been “marginal,” but cautioned that coding-level jobs could be at risk in the future. “It is not bad from an employment perspective overall, but people will have to upskill themselves to remain competitive,” he observed.
Outlook
Overall, while the tariff standoff with the United States presents short-term challenges, the Chief Economic Adviser expressed optimism that an amicable resolution was within sight. Coupled with strong GDP growth, rising demand, stable external accounts, and a government push for infrastructure, India’s economic trajectory, he argued, remains firmly on track.
