How will Trump tariffs impact India's GDP growth? LGT Wealth's Chakri Lokapriya explains

India's journey toward self-reliance, championed by Prime Minister Narendra Modi, is proving to be a powerful catalyst for long-term economic growth—particularly for Corporate India. While the term "Self-Reliance" was first introduced by PM Modi in 2014 in the context of national security, poverty alleviation, and the Digital India mission, it truly took centre stage in 2020 with the launch of the AtmaNirbhar Bharat Abhiyan—India’s bold economic response to the global COVID-19 pandemic.

In an era marked by rising protectionism and shifting global trade dynamics—especially during the Trump-led wave of deglobalization—India's strategic pivot toward self-reliance has positioned it to thrive. The AtmaNirbhar Bharat initiative, underpinned by Production Linked Incentives (PLI), has equipped Indian industry to reduce dependence on imports and emerge as a global manufacturing hub.

Resilience Amid Global Headwinds

The recently announced 25% + 25% punitive U.S. tariffs on select Indian exports (effective August 1) are expected to marginally impact GDP growth, moderating projections from 6.5% to approximately 6.25%. While specific sectors like textiles, pharmaceuticals, electronics, agriculture, and machinery may face some short-term pressure, the overall economic impact is minimal. With over 85% of India’s economy driven by domestic consumption, just 2% of Corporate India’s earnings are at direct risk.

This resilience highlights the foresight behind India’s self-reliance strategy. By strengthening domestic capabilities and reducing exposure to global supply chain shocks, India is safeguarding its economic momentum.

A Stronger, Self-Sufficient Defence Ecosystem

One of the most compelling illustrations of India’s self-reliance strategy is its transformation in the defence sector. The Ministry of Defence (MoD) introduced progressive reforms under the Defence Acquisition Procedure (DAP) 2020, enabling private sector participation through joint ventures with public sector undertakings and allowing up to 25% export of domestically manufactured defence products.

The Indian Armed Forces have committed to procuring indigenous products, creating a robust pipeline of demand. As a result, several Indian defence companies have experienced remarkable growth over the past five years. With the European Union now allocating up to 5% of its GDP toward defence, there’s a clear global tailwind for India’s advanced, technology-driven defence exports.

India’s Domestic-Driven Advantage

Unlike many export-dependent economies, India is uniquely positioned as a largely domestic-driven market. Its pivot to localised manufacturing and import substitution is therefore more sustainable and easier to implement. With the rapid scale-up of renewable energy and a steady decline in oil import dependency, India is also poised to benefit from a stronger currency in the coming years. This will likely boost per capita income beyond the current ~$3,000, unlocking the next wave of consumption growth.

India’s youthful demographic, rising middle class, and expanding digital economy collectively make it one of the most exciting investment destinations globally. The foundation laid by AtmaNirbhar Bharat is not just about resilience—it’s about building a competitive, future-ready India.

The author, Chakri Lokapriya, is the Chief Investment Officer (CIO), Equities of LGT Wealth India.

Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.