Indian goods heading to the US may be spared from the 25 per cent penal tariff imposed by the Trump administration by November 30, country’s chief economic advisor V. Anantha Nageswaran said in Calcutta on Thursday.
Speaking at multiple events organised by city-based chambers of commerce, the CEA said the discussion between two countries have been going on ‘beneath the surface’.
“Although I don’t have a crystal ball or any inside information, I can say that my personal confidence is that in the next couple of months, if not earlier, we will see resolution at least to the extra penal tariff of 25 per cent,” he said at the Bharat Chamber of Commerce.
The US imposed a 25 per cent reciprocal tariff on India on July 31 and then followed it up with another 25 per cent tariff as a penalty to buy Russian crude oil, which came into effect from August 27.
“It may also be the case that the reciprocal tariff of 25 per cent may also come down to levels that we were anticipating earlier, somewhere between 10 and 15 per cent. If that comes, that will be an even bigger occasion for celebration from the Indian context,” Nageswaran said.
Later, at an interactive session organised by the Merchant’s Chamber of Commerce, the CEA said the penal tariff of 25 per cent may not be there post November 30.
According to him, a resolution on US tariff would not only lift the sentiment but unlock growth potential even as India’s exports to the US are not ‘a very big sum’.
Growth forecast
India may grow by 7 per cent in three months ending September, building on the 7.8 per cent GDP growth in the first quarter. “The numbers are showing that the first two months of July and August are trending towards a fairly stronger growth momentum continuing rather than weakening, as we would have thought, ahead of the tariff,” CEA said.
“We won’t be surprised if the growth rate is again 7 per cent year-on-year,” he added.
The Economic Survey, which the CEA presented earlier this year, projected a growth of 6.3-6.8 per cent. Nageswaran said it is likely that the growth would be closer to the upper band.
Rupee strength
Nageswaran predicted that the Indian rupee is likely to show strength than weakness against the dollar in the next five years, even as he described the ₹88 level against the greenback as a ‘good thing’ at the moment, because it lends export competitiveness for the time being.
“I’m more inclined to believe that the kind of rupee strength we witnessed between 2003 and 2008 is more likely than a rupee weakness in the next five years, because of the American government’s willingness to tolerate a weaker dollar, and because the Indian economy’s underlying strengths will shine through in an otherwise uncertain world economy,” he observed.
Urban consumption
Nageswaran argued that urban demand is more ‘resilient’ than what it appears. He pointed out much of the consumption is shifted towards non-listed companies or through UPIs. According to NPCI data, every category showed 20 per cent growth year-on-year. “We may not be measuring urban consumption as well as we would like to by relying only on the data coming from listed FMCG companies,” he said.
