India's economy remains robust and resilient: ASSOCHAM President Sanjay Nayar
Sanjay Nayar, President Assocham and Founder and Chairman of Sorin Investment Fund, on private consumption recovery.
- Aug 28, 2025,
- Updated Aug 28, 2025 5:19 PM IST
US tariffs may have a modest impact on India’s GDP growth, but ongoing export promotion efforts, strengthening brand-building efforts and active diplomatic engagement are expected to help cushion the impact and sustain investor and business confidence, says Sanjay Nayar, President of the Associated Chambers of Commerce and Industry of India, and Founder and Chairman of Sorin Investment Fund. He tells BT that the domestic economy remains the primary engine of growth. Edited excerpts:
How will the US tariffs impact the Indian economy?
India’s economy remains robust and resilient even though uncertainty has increased due to global headwinds. Economic growth remains stronger than that of many peers, underpinned by strong domestic demand, fiscal prudence and supportive monetary policy. The International Monetary Fund has upgraded India’s GDP forecasts for FY26 and FY27. Favourable monsoons are further bolstering agricultural and rural performance.
The combined 50% US tariff on Indian imports is concerning for key sectors like garments, gems and jewelry, textiles, auto parts, leather, chemicals and ceramics, all heavily exposed to US markets. Exporters may face reduced price competitiveness, margin squeeze and potential order diversion to rivals like Vietnam and Mexico, which could shave off GDP growth estimates by 20 basis points. While the tariffs may have a modest impact on GDP growth, export promotion efforts, strengthening brand-building efforts and active diplomatic engagement may help cushion the impact and sustain investor and business confidence.
Will firms be more cautious on capex and hiring plans following the higher tariff?
They are unlikely to alter the investment sentiment in India. The domestic economy remains the primary engine of growth, supported by high household savings, rising consumption and improving ease of doing business. Robust foreign direct investment inflows, driven by confidence in India’s market size, policy stability and reform momentum, continue to support long-term investment plans.
However, businesses that are heavily export-oriented or directly exposed to the US market may revisit their short-term plans. Firms could adopt a wait-and-watch mode in certain areas while continuing to invest in capacity, diversification and technology.
With a stable policy framework, strong infrastructure push and supply chain resilience, India remains an attractive destination for foreign investors. While some sectors may face short-term adjustments, the domestic demand strength and consistent FDI attractiveness should help businesses adapt and maintain their growth trajectory.
With the RBI rate cuts, good rains and income tax rejig, do you expect stronger private consumption demand?
Yes, there’s a good chance that private consumption will improve this year. With the RBI reducing interest rates, borrowing becomes more affordable. This usually encourages people to take loans for things like homes, vehicles or big-ticket items. The timely and healthy monsoon should boost rural incomes, which plays a big role in driving demand. The income tax adjustments are likely to put more money in the hands of middle-income families, which could boost everyday spending. We expect positive movement especially in consumer goods, auto and housing. However, the real strength of this recovery will depend on how job creation and inflation are managed in the months ahead.
Do you expect the RBI rate cuts to finally nudge the private sector to invest?
Lower interest rates make it cheaper for companies to borrow money, which is a good thing. But on its own, this is not enough to make businesses start investing in a big way. Most companies want to be sure that there is steady demand for their products or services before they spend on large projects. That said, the government’s efforts to boost infrastructure and manufacturing, along with helpful schemes, have created a positive environment. If people keep spending and the policies stay stable, we are likely to see more private companies especially in manufacturing, green energy and digital sectors starting to invest. Still, it may take some more time before we see a strong and widespread investment push from the private sector.
@surabhi_prasad
US tariffs may have a modest impact on India’s GDP growth, but ongoing export promotion efforts, strengthening brand-building efforts and active diplomatic engagement are expected to help cushion the impact and sustain investor and business confidence, says Sanjay Nayar, President of the Associated Chambers of Commerce and Industry of India, and Founder and Chairman of Sorin Investment Fund. He tells BT that the domestic economy remains the primary engine of growth. Edited excerpts:
How will the US tariffs impact the Indian economy?
India’s economy remains robust and resilient even though uncertainty has increased due to global headwinds. Economic growth remains stronger than that of many peers, underpinned by strong domestic demand, fiscal prudence and supportive monetary policy. The International Monetary Fund has upgraded India’s GDP forecasts for FY26 and FY27. Favourable monsoons are further bolstering agricultural and rural performance.
The combined 50% US tariff on Indian imports is concerning for key sectors like garments, gems and jewelry, textiles, auto parts, leather, chemicals and ceramics, all heavily exposed to US markets. Exporters may face reduced price competitiveness, margin squeeze and potential order diversion to rivals like Vietnam and Mexico, which could shave off GDP growth estimates by 20 basis points. While the tariffs may have a modest impact on GDP growth, export promotion efforts, strengthening brand-building efforts and active diplomatic engagement may help cushion the impact and sustain investor and business confidence.
Will firms be more cautious on capex and hiring plans following the higher tariff?
They are unlikely to alter the investment sentiment in India. The domestic economy remains the primary engine of growth, supported by high household savings, rising consumption and improving ease of doing business. Robust foreign direct investment inflows, driven by confidence in India’s market size, policy stability and reform momentum, continue to support long-term investment plans.
However, businesses that are heavily export-oriented or directly exposed to the US market may revisit their short-term plans. Firms could adopt a wait-and-watch mode in certain areas while continuing to invest in capacity, diversification and technology.
With a stable policy framework, strong infrastructure push and supply chain resilience, India remains an attractive destination for foreign investors. While some sectors may face short-term adjustments, the domestic demand strength and consistent FDI attractiveness should help businesses adapt and maintain their growth trajectory.
With the RBI rate cuts, good rains and income tax rejig, do you expect stronger private consumption demand?
Yes, there’s a good chance that private consumption will improve this year. With the RBI reducing interest rates, borrowing becomes more affordable. This usually encourages people to take loans for things like homes, vehicles or big-ticket items. The timely and healthy monsoon should boost rural incomes, which plays a big role in driving demand. The income tax adjustments are likely to put more money in the hands of middle-income families, which could boost everyday spending. We expect positive movement especially in consumer goods, auto and housing. However, the real strength of this recovery will depend on how job creation and inflation are managed in the months ahead.
Do you expect the RBI rate cuts to finally nudge the private sector to invest?
Lower interest rates make it cheaper for companies to borrow money, which is a good thing. But on its own, this is not enough to make businesses start investing in a big way. Most companies want to be sure that there is steady demand for their products or services before they spend on large projects. That said, the government’s efforts to boost infrastructure and manufacturing, along with helpful schemes, have created a positive environment. If people keep spending and the policies stay stable, we are likely to see more private companies especially in manufacturing, green energy and digital sectors starting to invest. Still, it may take some more time before we see a strong and widespread investment push from the private sector.
@surabhi_prasad