'$23 billion hit on GDP...': Market expert calls for GST cuts, tax relief amid US tariff impact

Market expert Ajay Bagga has raised concerns over the sharp escalation in US tariffs on Indian goods, warning of significant consequences for India’s export-oriented sectors and overall economy. 

In a detailed post on X (formerly Twitter), Bagga outlined the immediate and long-term impacts of the new US tariffs that came into effect starting August 1, with another hike scheduled from 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. 

“Individual exporters from most affected sectors like auto ancillaries, textiles, gems and jewellery, carpets, chemicals, and metals will face losses in the busy season,” Bagga noted. 

He highlighted that for knitted apparel, which accounts for 35% of India's exports to the US, the effective tariff will rise to 63.9% from August 27. For carpets, where the US forms 58% of the market, the tariff will go up to 58.9%. 

Bagga cautioned that estimates suggest a 0.3% to 0.6% hit to India’s GDP, amounting to a drag of up to $23 billion. This does not yet include the second-order effects such as job losses in labour-intensive sectors, which he described as “very fluid and one day old.” 

He called for immediate government intervention, including relief packages for affected sectors and policy actions to boost domestic demand. These include: 

• GST cuts, particularly on consumption-heavy goods 
• Pass-through of lower crude prices to petrol, diesel, and cooking gas 
• Temporary suspension of Short-Term and Long-Term Capital Gains (STCG & LTCG) taxes to encourage domestic market participation 
• Deregulation and ease-of-doing-business measures 
• Smart funding for ROI-generating infrastructure 

Bagga also flagged that India’s consuming class of 150 million people is among the most heavily taxed globally and requires immediate tax relief to stimulate spending. 

He concluded with a broader cautionary note on global trade dynamics: “No country will allow another country to succeed as an exporter in these protectionist times... Building domestic consumption and resilience is the way ahead.” 

Expanded tariff Impact: Key sectors

Key takeaways 

• Textiles & Apparel: Tariffs approaching 60% erode price competitiveness; survival of MSMEs in knitwear, woven apparel, and home textiles at stake. 
• Gems & Jewellery: A jump from 2% to 52% tariffs could render exports to the US economically unfeasible. 
• Shrimp & Seafood: Already battling high tariffs, Indian exporters now face a 58% burden, making them far less competitive than Ecuadorian suppliers. 
• Pharmaceuticals: Currently exempt, but inclusion in future rounds of tariffs would severely disrupt India’s $8-11 billion pharma exports to the US.