Global financial services firm Nomura has revised India’s GDP growth forecast for FY26 down to 6%, citing the adverse impact of the United States’ 50% tariff on Indian exports. The downgrade comes amid rising concerns over the vulnerability of key sectors such as textiles, gems and jewellery, and micro, small and medium enterprises (MSMEs), which are heavily dependent on the US market.
The tariff, which took effect on August 27, 2025, is part of a broader trade retaliation linked to India’s continued purchase of Russian crude oil. While the government has defended its energy strategy as essential for national interest, the economic fallout is beginning to surface, with exporters reporting order cancellations, margin erosion, and supply chain disruptions.
🧭 Timeline of US Tariff Escalation and Economic Impact
| Date | Event Description | Economic Implication |
|---|---|---|
| April 2025 | US proposes 25% reciprocal tariff | Initial market reaction muted |
| August 2025 | Additional 25% penalty announced | Total tariff reaches 50% |
| August 27, 2025 | Tariffs take effect | Export sectors begin reporting losses |
| August 28, 2025 | Nomura revises GDP forecast to 6% | Down from previous estimate of 6.5% |
| Q3 FY26 | Expected slowdown in export-led growth | Policy recalibration underway |
Nomura analysts noted that the tariff shock could shave off 0.3–0.5 percentage points from India’s GDP growth, depending on the duration and breadth of the trade restrictions.
📊 Sectoral Exposure to US Tariffs
| Sector | FY25 Export Value to US (₹ crore) | Tariff Exposure (%) | Risk Level |
|---|---|---|---|
| Textiles & Apparel | ₹2,10,000 | 65% | High |
| Gems & Jewellery | ₹3,20,000 | 70% | High |
| MSME Products | ₹1,50,000 | 60% | High |
| Seafood (Shrimp) | ₹45,000 | 80% | High |
| Leather Goods | ₹38,000 | 55% | Moderate |
| Auto Components | ₹85,000 | 40% | Moderate |
| Pharmaceuticals | ₹1,25,000 | 20% | Low |
Exporters in these sectors are expected to face immediate cost escalations, reduced competitiveness, and potential job losses.
🔍 Nomura’s GDP Forecast Revision: Key Drivers
Nomura’s downward revision is based on a combination of external shocks and domestic vulnerabilities:
| Driver | Impact on Growth | Policy Implication |
|---|---|---|
| US Tariff Shock | Export contraction | Need for diversification and relief measures |
| Weak Private Investment | Low multiplier effect | Fiscal stimulus and credit support needed |
| Urban Consumption Stress | Stagnant wages, job cuts | Wage support and employment generation |
| Global Trade Uncertainty | Investor sentiment dampened | Bilateral trade negotiations accelerated |
The firm also warned that India’s current account deficit could widen to 2.5% of GDP in FY26, driven by lower export earnings and higher import bills.
📉 Exporter Sentiment and MSME Impact
MSMEs, which account for nearly 45% of India’s exports, are among the hardest hit. Many small exporters lack the financial buffers and market access to pivot quickly, making them vulnerable to prolonged disruptions.
| Exporter Type | Key Concern | Suggested Support |
|---|---|---|
| Large Corporates | Reworking supply chains | Faster FTA execution, export incentives |
| MSMEs | Lack of market access, high logistics cost | Subsidized trade fairs, digital platforms |
| EPCs | Need for sector-specific guidance | Dedicated diversification task forces |
The Commerce Ministry has initiated consultations with export promotion councils to explore shipment diversification and alternative markets.
🧠 Policy Response and Relief Measures Under Consideration
The government is evaluating a range of interventions to support affected sectors:
| Relief Measure | Target Group | Implementation Timeline |
|---|---|---|
| Interest Equalization Boost | MSMEs | September 2025 |
| ECGC Premium Reduction | All exporters | October 2025 |
| Trade Fair Grants | Sectoral EPCs | Q3 FY26 |
| RoDTEP Refund Acceleration | All exporters | Immediate |
| Digital Portal Launch | MSMEs, EPCs | November 2025 |
These measures aim to stabilize export momentum and prevent widespread layoffs in vulnerable industries.
🔥 Trade Agreement Acceleration and Market Diversification
India is fast-tracking trade negotiations with several countries and blocs to offset the US tariff impact:
| Trade Partner/Bloc | Agreement Status | Strategic Benefit |
|---|---|---|
| UK | Final round of talks | Duty-free access for textiles, pharma |
| EFTA | Ongoing | High-value goods, precision engineering |
| Australia | CECA Phase 2 | Seafood, auto components |
| UAE | CEPA implementation | Gems, jewellery, electronics |
| Latin America | Exploratory talks | Agro exports, leather goods |
The Commerce Ministry is also working with the Department of Revenue to explore tariff relief mechanisms for re-export-oriented units.
📌 Conclusion
Nomura’s GDP forecast cut to 6% underscores the gravity of the US tariff shock on India’s export-driven economy. With key sectors like textiles, gems, and MSMEs facing immediate pressure, the government’s response will be critical in shaping the country’s growth trajectory for FY26.
As policymakers, exporters, and trade bodies rally to mitigate the impact, India’s ability to diversify markets, accelerate trade agreements, and support vulnerable sectors will determine whether this setback becomes a turning point for long-term resilience.
—
Disclaimer: This article is based on publicly available news reports and official statements as of August 27, 2025. It is intended for informational purposes only and does not constitute financial, legal, or investment advice.
