India’s GDP Growth Could Be Impacted By Up To 30 Basis Points: Nomura’s Sonal Varma On US Tariffs

India’s GDP growth is expected to be around 6% in the financial year 2026 due to the broader impact of US President Donald Trump’s tariff policy, Sonal Varma, chief economist at Nomura, said on Monday.

Speaking to NDTV Profit, Varma explained that although India’s direct exposure to US tariffs is limited, the broader effects could be severe. “The direct impact of US tariffs on India is easier to estimate, with exports accounting for 2.2% of GDP, likely causing a 20-30 basis point impact. However, the bigger concern is weaker global demand, investment uncertainty, tighter financial conditions and reduced consumer demand due to the negative wealth effect. These second-round effects are hard to quantify,” she said, adding that India’s growth in FY26 will be soft.

“We think growth will be soft and in the ongoing financial year GDP growth is estimated at 6% on a year-on-year basis. But, we do see downside risk even to this projection. We've cut our numbers more significantly for other open economies in Asia and for the US as well,” she added.

President Trump, on April 2, announced sweeping tariffs on over 180 nations, including India. The US President defended his decision, noting the move was required to restore America’s wealth. He also claimed other nations had been “ripping off” the US through existing trade policies.

Varma predicted that the US will likely maintain high tariffs to encourage domestic investment. “Some rollback on tariffs is possible, but it may not be substantial. Even countries with FTAs with the US have faced a 10% tariff. The US effective tariff rate is likely to remain above 20% this year. If the US wants companies to invest domestically, it will likely keep tariffs high for some time, making tariff rates ‘sticky’. While some countries may negotiate slight reductions, the overall impact on global growth would remain significant,” she explained, predicting a slowdown in the US, Europe, and Asia, among other regions.

When asked if the situation could lead to a global trade war, Varma said, "it is a risk everyone is quite worried about". Pointing to the initial tension through China’s 34% retaliatory tariffs, Verma said countries might impose anti-dumping duties to protect local industries, jobs and the MSMEs.

“The risk of a global trade war is real. Phase two could see excess products redirected to new markets, creating a disinflationary effect on goods prices. Countries might impose anti-dumping duties to protect local industries and jobs. While no one wants a trade war, it's a risk we’re closely monitoring,” she added.