In a strongly worded post on X (formerly Twitter), noted market expert Ajay Bagga has raised red flags over the economic consequences of new US tariffs on Indian exports. Bagga emphasized the urgent need for Goods and Services Tax GST cuts and income tax relief to cushion the blow on India’s economy, warning that the tariffs could deliver a $23 billion hit to GDP.
🔗 Link: https://x.com/Ajay_Bagga
US Tariffs Come Into Effect from August 1
The new tariffs imposed by the United States officially came into effect on August 1, with a second hike scheduled for August 27. The tariffs — 25% now, and 50% later — are on top of existing WTO Most Favoured Nation (MFN) duties, sharply increasing the cost burden for Indian exporters.
These measures are part of a broader recalibration of trade policy under the current US administration, aiming to address its trade deficit but drawing criticism for triggering uncertainty in global markets.
Bagga highlighted that these tariff hikes could drastically affect India’s export-driven sectors, particularly in textiles, pharmaceuticals, and engineering goods, which are heavily dependent on the US market.
Ajay Bagga Warns of $23 Billion GDP Impact
According to Bagga, the direct and indirect consequences of these tariffs could lead to a $23 billion dent in India’s GDP over the coming quarters. He warned that this economic jolt would not only hurt large corporations, but also significantly impact MSMEs (Micro, Small, and Medium Enterprises) and the job market, particularly in labor-intensive industries.
“With US tariffs now biting and another hike expected soon, India urgently needs countermeasures. I estimate a $23 billion hit to GDP unless policy support is extended to affected sectors.” – Ajay Bagga
Call for GST Reductions and Tax Relief
In response to the potential fallout, Bagga urged the Indian government to:
- Reduce GST cuts rates on key sectors likely to be hit the hardest
- Offer temporary income tax relief to boost consumer spending and domestic demand
“GST cuts for exporters and wider income tax relief could create a consumption cushion against export contraction.” – Ajay Bagga
Industry Groups Echo Concerns
Following Bagga’s remarks, several industry associations have echoed similar concerns. Export councils have urged the government to take swift action to preserve India’s competitiveness and mitigate the cascading effects of:
- Rising input costs
- Weakening demand
- Geopolitical uncertainty
“Individual exporters from most affected sectors like auto ancillaries, textiles, gems and jewellery, carpets, chemicals, and metals will face losses in the busy season.” – Ajay Bagga
Wider Implications for India-US Trade Ties
The tariffs come at a sensitive time in India-US relations, as both nations seek to deepen economic cooperation. Trade experts warn that these duties could:
- Derail progress on long-pending agreements
- Cast a shadow over FDI (Foreign Direct Investment) inflows
Bagga concluded his post by calling for a calibrated policy response, emphasizing that India must:
“Protect growth momentum” and shield its industries through smart fiscal interventions.
Conclusion
With the first phase of US tariffs already in place and more to follow, Indian policymakers are under pressure to act. Ajay Bagga’s warning of a $23 billion GDP impact underscores the urgent need for GST and tax relief measures to stabilize the economy and protect vulnerable sectors.
As the global trade landscape shifts, India’s resilience may well depend on its ability to adapt quickly and decisively.
