US tariffs will have limited impact in FY26, GST reforms to soften the blow: Chief Economic Advisor

New Delhi [India], September 10 (ANI): The United States' tariff action on Indian exports may not significantly impact the current financial year, but prolonged duties could affect investment sentiment, Chief Economic Advisor (CEA) to the Government of India, V Anantha Nageshwaran, said on Wednesday.
"For the first five months of the current financial year, exports to the US have almost already achieved half the number of last year. So in other words, in this financial year, the impact may be relatively limited depending on the assumptions one makes," he stated.
Speaking at the AIMA 52nd National Management Convention, Nageshwaran explained that quantifying the exact impact of tariffs or GST is difficult. "Trying to be very precise about the quantitative impact of either the tariff or the GST is definitely fraught with a wide margin of uncertainty," he said.
He noted that while it is easy to estimate the immediate effect of higher tariffs on India's exports to the US, the broader consequences would depend on how long the penal duties, including the 25 per cent tariff, remain in place. "In the event that it is slightly longer than we want it to be, the second and third round effects will become more pronounced, which is the uncertainty with respect to investments, capital formation, overall sentiment in the economy," the CEA said.
However, Nageshwaran highlighted that GST reforms would soften the blow by generating domestic demand. "By substituting domestic demand for whatever the export demand that may not materialize from the United States, what GST reform does is to alleviate the second and third round effects by creating domestic demand and therefore removing the uncertainty which will come in the way of capital formation," he said.
Speaking about job creation, the CEA said India must strike a careful balance between adopting new technologies such as artificial intelligence and protecting jobs in a country with a young population. "We have estimated that eight million jobs have to be created," he said. While technology boosts productivity, it must be aligned with social stability in the medium term.
Nageshwaran described labour reforms as a "two-sided partnership" between the government and the private sector. While governments are focused on making it easier for businesses to operate, he said companies must also maintain a balance between technology adoption and labour inclusion to avoid social disruption.
"In the very short run, there is a trade-off between technology deployment and labour deployment. But in the medium run, there is no trade-off," he said, adding that an economy cannot enjoy productivity gains if job creation is ignored. He cautioned businesses to use technology to augment, not replace, labour.
The CEA said the changes may not appear as headline developments but are being steadily rolled out across states. "Labour is a concurrent subject. Although the four labour codes are being implemented at varying speeds by different governments around the country, state-level deregulation activities have been underway since the beginning of the calendar year," he said.
He pointed out that several states have relaxed rules restricting women from entering certain occupations once considered hazardous. "Over time, rules and restrictions relating to overtime are being relaxed. The creation of third shifts and the duration of shifts themselves are being relaxed," he added.
According to him, labour reforms should not be viewed as measures against worker rights but as a balancing act. "It is about balancing the rights of those who have a job and the rights of others who don't have one to have one," Nageshwaran said, calling it "a tango that both governments and the private sector have to do." (ANI)