India’s economy shows few signs of a clear recovery and faces fresh risks from US President Donald Trump’s tariff threats, former chief economic adviser Arvind Subramanian has warned at a time when the government in Delhi is celebrating what it calls a “Goldilocks moment.”
The First Advance Estimates released by the Union Ministry of Statistics and Programme Implementation on Wednesday pegged GDP growth at 7.4 per cent in FY26, higher than the Reserve Bank of India’s forecast of 7.3 per cent and above the government’s earlier projection of 6.3-6.8 per cent.
“We should read that figure cautiously,” Subramanian, who was the Narendra Modi government’s chief economic adviser for a little under four years from 2014 to 2018, told Bloomberg in an interview.
The BJP had seized on the data to underline its economic narrative, calling the current phase a “Goldilocks moment”.
Subramanian, senior fellow at the Watson Institute for International and Public Affairs at the Ivy League Brown University, pointed to the use of an unusually low deflator in the GDP calculation, raising doubts about how inflation has been stripped out of the growth estimate.
“Even directionally, it is not obvious that the economy is recovering,” he said.
He refused to put a “precise number on growth” but said that if the figures hold next year, “India should consider itself fortunate and view that as a job well done, given the heightened uncertainty.”
A major uncertainty is the trade policy of the US – India’s largest export partner – under President Trump.
His punitive 50 per cent tariffs on Indian goods, said to be linked to New Delhi’s purchases of Russian oil but also believed to be a pressure tactic in the trade deal negotiations, have added strain to an already fragile global trade environment.
“It is now looking less likely that there will be a trade deal,” Subramanian said, warning that “tariff rates may even move higher.”
On Wednesday, news broke that Trump has “greenlit the bipartisan Russia Sanctions Bill” that envisages “at least 500 per cent” duty on countries that do business with Russia – like China, Brazil and India.
Subramanian also flagged what he called “Chinese mercantilism”, as low-cost goods are increasingly exported and diverted to developing economies, including India.
This, he said, could put pressure on domestic producers and dampen growth.
At home, public finances remain another area of concern.
Subramanian said the macro position is reasonably strong but the fiscal situation “is not as strong as it should be”. He cited the GST rate cuts as evidence.
He also called for greater flexibility in the rupee to support exporters facing external shocks.
“However, the Reserve Bank of India appears reluctant to allow the rupee to be fully flexible. That policy stance needs closer examination,” he said.
Global investors are also tempering their expectations. Goldman Sachs expects India’s growth to slow to 6.8 per cent in FY27 from an estimated 7.3 per cent in FY26, despite the government’s 7.4 per cent estimate for the current year.