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Investing.com-- India’s economic growth and current account deficit could take a hit after the United States imposed 25% tariffs plus an unspecified "penalty" on Indian goods without a trade deal, analysts at ANZ warned in a research note.
The tariffs, effective August 1, are just 1 percentage point below the so-called "liberation day" reciprocal rate of 26%. They could shave 40 basis points off India’s GDP growth and widen its current account deficit by a similar margin in fiscal year 2026, ANZ economists said.
The move, linked to India’s energy and military purchases from Russia, leaves New Delhi at a disadvantage compared to other Asian economies facing lower U.S. tariffs, they added.
"The 25% tariff rate on India is higher than the usual 15–20% range that other Asian economies have negotiated, and close to mainland China’s current ~30% rate," ANZ economists wrote.
"If sustained, the high tariffs will dent India’s allure among foreign businesses that consider India an important player in their diversification strategy."
The Indian rupee, already underperforming regional peers, may face further pressure, prompting likely intervention by the Reserve Bank of India (RBI) to curb volatility, ANZ said.
The Indian rupee fell sharply against the dollar on Wednesday after Trump announced rates, with the USDINR pair rising 0.7%. It traded flat on Thursday.
Stock markets were also under pressure with Nifty 50 dropping 0.6% on Thursday.
ANZ expects the RBI to cut interest rates by 25 basis points in August, earlier than previously forecast, to counter growth risks as inflation remains subdued.
"Both will continue to negotiate, although it is unclear how the standoff on key issues such as market access to India’s agricultural and food sector will be resolved," ANZ said.
"Trade policy and economic uncertainty are set to persist weighing on market sentiment and economic activity," economists concluded.