Govt working on solutions to mitigate impact of US tariff hike: DEA Secy

New Delhi: The government is working on an action plan to mitigate the impact of a steep 50 per cent tariff hike imposed by the US on Indian shipments, Economic Affairs Secretary Anuradha Thakur said.

"There are certain employment-heavy sectors that do have exposure to the US and, to that extent, may get affected. The government is well aware of this, is assessing the possible impact, and working towards viable solutions," she told PTI in an interview.

The Department of Economic Affairs (DEA) Secretary added that the government has already taken some steps and more are in the pipeline to perk up domestic demand, which could also support manufacturing units feeling the heat of US tariffs.

In the Budget, the government announced zero income tax for income up to ₹12 lakh under the new tax regime, providing substantial savings to taxpayers. It also rolled out plans for GST rate rationalisation, expected to bring down the prices of many commodities.

A better-than-expected monsoon is likely to boost agricultural production, further spurring rural demand.

Thakur expressed confidence that the government is on track to meet the fiscal deficit target of 4.4 per cent set in the Budget, despite temporary mismatches reflected in the latest monthly numbers.

The statement assumes significance as the Centre's fiscal deficit rose to 29.9 per cent of the full-year target at the end of July, compared with 17.2 per cent of the Budget Estimates (BE) during the same period last year.

"This question (of achieving the target) has been coming up because of the latest numbers. I would like to say that quarter-by-quarter or month-by-month assessments of fiscal deficit may not give a correct picture because of temporal mismatches on the receipts and expenditure side. On the overall fiscal deficit numbers, our assessment so far is that we will be able to achieve the target," she said.

The Centre estimates the fiscal deficit during 2025-26 at 4.4 per cent of the gross domestic product (GDP), or ₹15.69 lakh crore.

Thakur stressed that the fundamentals of the economy remain strong. "Even private consumption numbers that came out on Friday are showing positive movement," she noted.

Gross capital formation data also showed that both public and private capex are strong, with expectations that the trend will continue in the coming quarters.

"Government capex has played a key role in sustaining our numbers so far. Not only on the fiscal deficit side, but the growth numbers also remain robust," she said.

On the June-quarter GDP growth of 7.8 per cent, Thakur said it reflects the broad-based nature of India’s economic expansion.

"Q1 numbers reflect the resilience of our economy. They show strengthening momentum anchored in strong macroeconomic fundamentals," she said.

Looking ahead, Thakur pointed out that the main factors supporting growth include strong performance in manufacturing, construction and services, robust agricultural output, and resilient domestic demand.

India’s economy grew by a stronger-than-expected 7.8 per cent in April-June, its fastest pace in five quarters. The growth was driven by agriculture and supported by services like trade, hotels, finance and real estate, according to the latest government data released on Friday.

The previous highest pace of growth in GDP was recorded at 8.4 per cent during January-March 2024.

India remains the fastest-growing major economy, with China’s GDP growth in the April-June quarter at 5.2 per cent.