'India's GDP may take 0.5% hit in FY26 due to US tariffs': HSBC's Pranjul Bhandari

India’s economy could grow slower than previously expected in FY26, with HSBC Chief India Economist Pranjul Bhandari warning that US President Donald Trump’s sweeping tariff hike may shave off 0.5 percentage points from GDP growth this year.

“We (India) sell a lot of goods to the US and now we will be charged extra tax on that, which is higher than what you were charged before,” Bhandari said in an exclusive interview with Business Today's Rahul Kanwal. “Somebody will have to bear that pain—either the Indian producer of that good or the American consumer of that good or a mix of the two.”

Bhandari estimates India’s GDP growth could be lower than earlier projected due to the direct hit from tariffs. “For example, I was expecting growth to be 6.5% but it could be 6% now or maybe slightly lower,” she said. “So there's going to be a growth drag on the back of all of this.”

While the Reserve Bank of India’s rate cuts may help cushion the blow, Bhandari flagged a second, more worrying impact: a slowdown in global trade volumes.

“There's also an indirect drag which we have to be very careful about. With all of these tariffs, global growth volumes will slow...There’ll be this big indirect impact. My sense is that GDP growth in India is going to be lower in FY26 much more than we had thought.”

On sector-specific effects, Bhandari said the impact is fluid and highly sensitive to policy changes. “We can discuss a set of winners and losers today, but if any changes are made that set could completely change tomorrow,” she noted.

For instance, she pointed out that pharma exporters initially feared a hit, but their outlook changed overnight when pharmaceuticals were exempted from the tariffs. “So today, the pharma stocks did very well...but there are many other sectors —textile, autos, agri, chemicals — which will now face higher tariffs than we thought just 48 hours ago.”

The uncertainty, she said, could stall investment. “People who want to do investments in capex on pharma or textile—they'll all sit back. Nobody will do anything because things are changing quite rapidly with a stroke of a pen.”

The US has imposed 27% reciprocal tariffs on most Indian goods starting April 9, over and above the baseline 10% effective from April 5. While sectors like energy, semiconductors, and select pharmaceuticals have been exempted, key Indian exports including garments, medical devices, and jewellery are expected to be affected.

The Indian government has said it is closely evaluating the impact and exploring ways to turn the disruption into opportunity through deeper trade engagement with the US.