India's gross domestic product may see a net impact of around 25-30 basis points, due to the reciprocal tariffs announced by the United State of America, says Keki Mistry, former vice chairman and CEO of the erstwhile Housing Development & Finance Corporation. Mistry is also presently on the board of HDFC Bank.
In an interview with NDTV Profit, Mistry said that the tariffs themselves might result in a 40 basis points hit to GDP. But as the Reserve Bank of India is widely expected to cut the benchmark repo rate and ensure better liquidity availability, the net impact might be 10 basis points lower, he said.
"More liquidity will enhance the GDP growth by 10-odd basis points. Net-net in my view the impact on GDP will not be more than 25-30 basis points, which is not a material number at all," Mistry said.
Mistry is bullish on the Indian economy in 2025-26. As inflation is largely under control, another rate cut is likely on the way, with RBI injecting additional liquidity, and the government spending rising, there is reason for this bullishness, he said.
"The only real thing we need to ensure, and full compliments to the government for doing it, is that we are creating enough jobs for all the youngsters coming out of schools and colleges every year," Mistry said.
On a relative basis, India is doing much better than other neighbouring economies which compete on exports. While the first order impact of the tariffs might be limited, fears do exist if India's IT industry will bear the brunt of a US slowdown.
"I don't buy that theory. If there is pressure in the US economy, contrary to expectation of IT slowing down, you may actually see IT spending increasing. Companies then want to take advantage of better technology, better systems in order to cut down on manpower costs," said Mistry.
Mistry believes that the current tariff structures announced by the US are not set in stone and we may see further negotiations play out.
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