India likely to see revision of GDP target for FY26:Economy’s size may expand more with potential ‘Trump Tariff’ cut to 18%

After the US President Donald Trump announced reduction of reciprocal tariffs on India from 25% to 18% and following the White House officials’ confirmation that in the India-US trade deal, America would completely remove additional punitive tariffs of 25% for stopping Russina oil purchase, and that the effective tariff on India would be only 18%, many are puzzled by how much this development would positively impact India’s GDP growth rate for the financial year 2025-26 (FY26.) Global institutions raise India’s GDP target: Global investment banks raise India’s GDP projections after Trump’s claim of a reduction of tariffs on Indian goods to 18%. According to ANI, Goldman Sachs said, “Overall, we raise our CY26 real GDP growth forecast by 20 basis points to 6.9% yoy.” Economic Survey 2025-26 projected GDP of 6.8%-7.2% for FY26: The Economic Survey 2025-26 had projected India’s GDP growth rate of 7.4% for FY26. But the country’s growth rate might actually be higher than the projections following the reduction of tariffs. Top official: Too early to say by how much will govt revise India’s GDP On whether the deal could lift growth beyond the Economic Survey’s 6.8% to 7.2% projection, Anuradha Thakur, Secretary in the Department of Economic Affairs said to news agency, ANI, that it was too early to quantify the upside as the agreement was not factored into earlier estimates. “I will wait for things to, first to get the details,” she said. Thakur said this on the sidelines of Federation of Indian Chambers of Commerce and Industry (FICCI) Conference on the Union Budget 2026-27 in New Delhi to ANI. “Today, our Indian economy continues to demonstrate strong macroeconomic resilience, despite a global environment which has uncertainty,” Thakur said while addressing the Industry chamber post budget event. Thakur said stable macroeconomic fundamentals, calibrated economic management and a stable financial system have enabled India to sustain growth and support long-term investment decisions. RBI guv: We considered 50% tariffs in our GDP projections The Reserve Bank of India (RBI), governor, Sanjay Malhotra, while delivering the ‘Post Monetary Policy Press Conference on December 5, 2025, had said that the authorities had earlier reduced the growth rates because of the high tariffs. He had added that sectors which were tariff impacted were the likes of textiles, leather, shrimps, gem and jewellery. He also added that these sectors accounted for a smaller share of India’s total exports. According to Malhotra, the government had given a relief package to the exporters who were looking to diversify their exports. Both the IMF and the RBI have pegged India’s GDP growth rate of 7.3% in FY26. Impact of Trump tariffs on India? Malhotra had said that the impact of ‘Trump Tariffs’ on India had been minimal because India is a domestic demand-driven economy. The RBI governor said, “We didn’t consider the trade deal with the US in our projections of India’s GDP growth rate. Impact of 50% tariffs were included in the RBI’s projections of India’s GDP growth rate.” What is GDP? GDP is used to track the health of the economy. It represents the value of all goods and services produced within a country during a specific period. This includes production by foreign companies operating within the country’s borders. There are two types of GDP: GDP is of two types: Real GDP and Nominal GDP. In Real GDP, the value of goods and services is calculated based on the value or stable prices of a base year. Currently, the base year for calculating GDP is 2011-12. Nominal GDP, on the other hand, is calculated at current prices. How is GDP calculated? A formula is used to calculate GDP: GDP = C + G + I + NX, where C stands for Private Consumption, G stands for Government Spending, I stands for Investment, and NX stands for Net Exports. Who is responsible for the fluctuations in GDP? There are four important engines that contribute to increasing or decreasing GDP. The first is you and I. The more you spend, the more you contribute to our economy. The second is private sector business growth, which contributes 32% to GDP. The third is government spending. This means how much the government is spending on producing goods and services, which contributes 11% to GDP. And the fourth is Net Demand. For this, India’s total exports are subtracted from total imports because imports are higher than exports in India, so its impact on GDP is negative.