The Indian government is rolling out a strategic action plan to counter the severe impact of a 50% tariff hike imposed by the US on Indian exports, as announced by Economic Affairs Secretary Anuradha Thakur on August 31, 2025. In an exclusive interview, Thakur highlighted the vulnerability of employment-heavy sectors with significant US exposure, assuring that the government is meticulously assessing the fallout and crafting tailored solutions to shield these industries from economic strain.

To bolster resilience, the government has already introduced measures to stimulate domestic demand, a critical buffer against the tariff pressure on manufacturers. Key initiatives include a zero-income-tax policy for earnings up to Rs 12 lakh under the new tax regime, offering substantial relief to taxpayers, and upcoming GST reforms aimed at rationalizing rates to lower commodity prices. Additionally, a robust monsoon is expected to enhance agricultural output, fueling rural demand and providing a much-needed economic lift.

Despite a fiscal deficit spike to 29.9% of the annual target by July—up from 17.2% last year—Thakur remains confident in meeting the 4.4% fiscal deficit goal for 2025-26, pegged at Rs 15.69 lakh crore. She dismissed short-term fluctuations as misleading, attributing them to timing differences in revenue and expenditure, and stressed that the government’s long-term fiscal strategy remains on track. This optimism is underpinned by strong economic fundamentals, with recent data showing a positive uptick in private consumption and robust public and private capital expenditure.

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India’s economy demonstrated its strength with a remarkable 7.8% GDP growth in the April-June quarter, the fastest in five quarters, outpacing China’s 5.2%. Thakur attributed this growth to a broad-based surge in manufacturing, construction, services, and agriculture, bolstered by resilient domestic demand. The farm sector’s strong performance, alongside thriving trade, hotel, financial, and real estate sectors, has cemented India’s position as the world’s fastest-growing major economy. The previous peak of 8.4% growth in January-March 2024 further highlights this momentum.

Looking ahead, Thakur expressed faith in the continuity of these growth drivers, with government capital expenditure playing a pivotal role in sustaining economic vitality. As the nation navigates this tariff challenge, the focus on domestic strength and sectoral support aims to mitigate external pressures, positioning India for sustained prosperity despite global trade tensions. This proactive approach underscores a commitment to protecting jobs and economic stability in the face of international economic headwinds.

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