The decision by President Donald Trump to slap an additional 25 per cent duty, taking the cumulative levy on Indian goods to 50 per cent, has been met with strong criticism in New Delhi and concern among key industries.
Yet, far from being a setback, the move may serve as a wake-up call for India to accelerate structural reforms, expand its export markets, and lean further into its role as one of the world’s most dynamic growth engines.
Former Niti Aayog CEO and G20 Sherpa Amitabh Kant struck a chord when he described the US action as “ironical” and cautioned that this was “not about Russian oil” but about India’s energy security and strategic autonomy.
In his words, India must not compromise on its sovereign decision-making under global pressure. Instead, he urged policymakers to treat the moment as an opportunity to launch once-in-a-generation reforms that would strengthen India’s resilience in an increasingly volatile global economy.
The tariffs, which primarily hit sectors such as textiles, leather, marine products, and gems and jewellery, are undeniably tough.
Exporters worry about losing competitiveness in the US market, where India has built a strong foothold over decades. Yet economists and trade analysts argue that India is better positioned today than at any time in the past to withstand such shocks.
Unlike in the 1990s or early 2000s, India now commands the heft of a $4.3 trillion economy (nominal GDP, 2025), ranked fourth globally and projected to climb to third place within this decade. The country’s macroeconomic fundamentals remain robust.
Growth in 2025 is expected to hover between 6.5 and 6.8 per cent, making India the fastest-growing major economy, according to the International Monetary Fund.
The World Bank too has underlined India’s role as “the single largest contributor to global growth” through 2025–2026, with its expanding middle class and rising consumption fuelling demand.Major consultancies and rating agencies remain upbeat.
Ernst & Young has projected that India is on track to become the second-largest economy in the world on purchasing power parity (PPP) terms by 2038, overtaking even the European Union bloc. PwC has forecast that by 2030 India’s consumer market could be worth $6 trillion, powered by urbanisation, digital adoption, and an aspirational young demographic.
McKinsey, meanwhile, highlights India’s emergence as the “nerve-centre of global supply chains” as companies diversify beyond China in search of resilient and cost-effective bases. Such projections underscore why New Delhi sees the tariffs not as an existential threat but as a catalyst to deepen its reform drive.
Policymakers are already doubling down on trade diversification, with fast-tracked negotiations on free trade agreements with the EU, the UK, Australia, and Gulf states. The recently concluded Comprehensive Economic Partnership Agreement with the UAE and the India-Australia Economic Cooperation and Trade Agreement are testimony to this push.
The structural shifts underway in the economy lend additional confidence. India is rapidly transforming into a manufacturing hub under its “Make in India” and “Atmanirbhar Bharat” programmes, with electronics, renewables, defence, and pharmaceuticals seeing record investment inflows. Foreign direct investment touched $71 billion in FY2024, with global giants committing long-term capital.
Simultaneously, India is spearheading the clean energy transition, targeting 500 GW of renewable capacity by 2030, while also leading in sunrise sectors such as artificial intelligence, space technology, and green hydrogen.Amitabh Kant’s call to use the moment as a spur for reform echoes a broader consensus among Indian thought leaders that adversity often sharpens the country’s resolve.
Economists recall that the 1991 balance-of-payments crisis catalysed the liberalisation wave that transformed India into a global growth story. The current tariff shock, while challenging, could similarly accelerate supply-side reforms, labour flexibility, logistics upgrades, and export competitiveness. India’s critics warn that tariffs will inflict near-term pain on small exporters, particularly in labour-intensive sectors.
But even here, the government has moved swiftly with targeted credit lines, export incentives, and policy support to cushion the blow. Simultaneously, the rise of domestic demand provides a powerful buffer. With private consumption accounting for nearly 60 per cent of GDP and rural recovery underway, India’s growth model is no longer excessively reliant on external demand.
The broader message is clear: India is too large, too dynamic, and too strategically important to be sidelined in global trade. The country’s demographic dividend, with more than 65 per cent of its population under 35, positions it as the world’s innovation and consumption hub for decades to come. International investors continue to view India as a rare bright spot, a place where growth prospects outweigh geopolitical risks.
The US tariffs may hurt in the short term, but they cannot derail the trajectory of a nation on the rise, economists argue. Instead, they may well galvanise India into taking bold steps that accelerate its march toward becoming the world’s third-largest economic power before 2030 and the second largest by PPP metrics within 15 years.
As the IMF recently observed, India “is not just participating in the global economy, it is shaping it.” What emerges from the current standoff is not a story of vulnerability but of resilience.
India’s dynamic leap forwards, its reform momentum, and its demographic strength ensure that it is uniquely placed to turn challenges into opportunities. If history is any guide, the tariffs may end up reinforcing—not undermining—India’s rise as a global economic powerhouse.
