US tariffs to hit textiles, gems, MSMEs hard; GDP growth forecast cut to 6%: Nomura

New Delhi: India’s economy faces significant risks from steep US tariffs, with export-heavy sectors such as textiles, gems and jewellery, food and marine products likely to bear the brunt, said Aurodeep Nandi, India Economist at Nomura. While smartphones, pharma and petroleum products remain exempt, nearly 30–40% of India’s export basket is directly exposed to the tariff hike, he told ET Now. Another 30% to 40% of the total basket is either exempt or treated differently. Auto is getting hit with a 25% tax since they fall under a different category in Section 232. Likewise, iron and steel segment is already taxed at 50%.

The economist cautioned: “The direct hit is on exports, but the second-round effect will be felt in jobs and demand. If tariffs persist until FY26, the recovery for these sectors will be slow and uneven.” He also warned that MSMEs are at greater risk.

“India’s biggest export items like smartphones (18%), pharma (11%) and petroleum are excluded. But frontline sectors such as textiles, gems, jewellery and marine products now face 50% tariffs versus 10–20% for peers. That’s a massive competitive disadvantage,” Nandi said. The impact, he added, will spill into employment, informal economies around export hubs, and consumption demand.

FY26 GDP growth forecast cut

Nomura has cut India’s FY26 GDP growth forecast to 6% from 6.2%, factoring in weaker exports and delayed private capex recovery. “Private investment is already subdued, and with this uncertainty, companies will take a backseat. The festive season and GST tax cuts will provide some support, but overall sentiment is dampened,” he noted.

On government measures, Nandi said GST rationalisation and reform push could ease business costs over time, but will take longer to offset tariff shocks. Their effectiveness against the negative impacts of tariffs remains to be seen. RBI, he added, will likely step in with further monetary easing. “We expect 50 basis points of cuts—25 bps in October and another 25 bps in December. Growth and inflation are both tracking lower than RBI’s forecasts, making this an appropriate time to continue the easing cycle,” he said.

Sectorally, Nandi warned that MSMEs are at greater risk since they lack margins to absorb steep tariff hikes, forcing some units in gems and jewellery to consider relocating overseas. The broader concern, he said, is that prolonged tariff pressure could squeeze export-driven clusters, reduce employment, and weaken domestic consumption.