By Nikunj Ohri
(Reuters) -The impact of U.S. tariffs on the Indian economy will be partially offset by recent consumption tax cuts that are expected to boost domestic demand, India’s Chief Economic Advisor said on Wednesday.
The goods and services tax (GST) cuts announced by Prime Minister Narendra Modi’s government would have “compensating effects” on India’s economy, V. Anantha Nageswaran said.
The net impact of higher tariffs and lower domestic taxes will be a drop of 0.2%-0.3% points on GDP growth estimates for the year, he said.
India’s GDP growth for the current financial year is projected at 6.3%-6.8%.
“GST reforms will play a very good offsetting role, by substituting domestic demand for whatever the export demand that may not materialise from the United States,” Nageswaran said.
The initial impact of U.S. tariffs on Indian goods in the current financial year will be limited, but prolonged tariff uncertainty from the 25% penalty duty imposed by the United States on India for buying Russian oil could weigh on the South Asian economy, he said.
(Reporting by Nikunj Ohri; Writing by Shilpa Jamkhandikar; Editing by Tom hogue and Saad Sayeed)
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