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Government on Impact of 50% US Tariff: Finance Ministry Issues Key Statement
Global Growth Concerns Could Offset Losses
On August 27, the Finance Ministry said that the global economy may face slower growth, which could help keep commodity prices under control. This, in turn, may partially offset the losses caused by the US tariffs. However, the ministry emphasized that risks to India’s growth will reduce only if trade talks with the US continue.
Highlights from Monthly Economic Review
In its July Monthly Economic Review, the Finance Ministry noted that the immediate impact of US tariffs on exports may remain limited in the short term. However, the secondary effects on the broader economy could be significant and require close attention. Talks with a US delegation were expected later this month, but the visit was eventually canceled.
Joint Effort by Government and Private Sector
According to the ministry, uncertainty remains regarding the impact of US tariffs on exports and capital formation. But with coordinated efforts between the government and private sector, the damage could be contained. The ministry added that such external shocks make the economy stronger and more resilient. If large companies with strong financial capacity absorb the short-term impact, small and medium-sized enterprises (SMEs) could emerge stronger from the crisis.
Focus on Trade Agreements with Multiple Countries
The ministry highlighted India’s diversified trade strategy in response to global shifts. Recently, India signed a free-trade agreement (FTA) with the UK, and talks are ongoing with the US, EU, New Zealand, Chile, and Peru. However, results from these negotiations will take time and may not fully compensate for the decline in exports to the US.
Favorable Domestic Conditions
On the domestic front, conditions appear positive. Monsoon rainfall has been above average, retail inflation is expected to remain under control, and crude oil prices are stable. This stability is expected to keep foodgrain prices soft. The government is working to reduce risks through capacity expansion, export growth, and supply chain diversification. Alternative import sources are being explored, and reforms are being accelerated. A dedicated task force has been set up to provide recommendations on next-generation reforms to boost economic growth.
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