Jefferies' Greed & Fear: 50% Tariff To Hit India's GDP, Risk Earnings Growth

Jefferies' Greed & Fear: In case the US keeps its tariff rate unchanged at 50%, India's GDP will likely be impacted by 1–1.2% and as well corporate earnings, Christopher Wood said in the Jefferies' Greed & Fear report.

Wood and its team acknowledged while 50% tariff does not pose any direct impact on Indian corporates, it has blackened the outlook for small and micro enterprises in the employment-heavy sectors if sustained for longer time.

The higher tariffs also have a clear potential to negatively impact micro finance and consumer finance companies. "The longer the tariffs are in place, the more the negative consequences will show up," Wood said.

Despite the grim backdrop, India's stock markets have not reacted negatively of late, Wood said in the Greed & Fear note. Consumption-related stocks were specifically insulated from the external threat on policy response from the government.

Jefferies' Greed & Fear team heard from officials in New Delhi that the plan to rationalise the Goods and Services Tax structure was long due but the process just accelerated as the US imposed 50% tariff on Indian imports.

GST cuts are proven to be self-financing as it will generate more sales. The impact on the fiscal position of the central government is minimal, Christopher Wood said in the Greed & Fear report.

As tax cuts announced in the budget for fiscal 2026 are only going to boost the purchase power of 3 crore Indians, the GST cuts will boost disposable income of more people, the report said.

India recorded its lowest nominal GDP growth in the March quarter in the last two decades, Jefferies said. It decelerated to 8.5–9% from 10%. The reason behind this a nominal slow down in headline inflation and Wholesale Price Index.

The impact of GST cuts will be deflationary, the recent monetary and fiscal easing are likely going to lift the nominal GDP growth from next fiscal year. Earnings' growth will also pick up.

Jefferies has forecasted that MSCI India earning-per-share growth to increase from 10% in fiscal 2026 to 16% in fiscal 2027, after slowing from 18% in fiscal 2024.