Tue Feb 18 00:05:10 UTC 2025: ## India’s Economic Slowdown Deepens Amidst US Trade Tensions and Domestic Challenges

**New Delhi/Washington D.C.** – India’s economic growth is slowing, raising concerns about deeper structural problems just as Prime Minister Narendra Modi met with President Donald Trump at the White House. The slowdown, projected at 6.4 percent for the year ending March – the lowest in four years – comes amidst rising trade tensions with the US and persistent domestic challenges.

President Trump’s announcement of reciprocal tariffs on trading partners, including India, exacerbated the situation. While the two leaders agreed on India purchasing F-35 fighter jets and US oil and gas, and initiating trade deficit negotiations, these deals could negatively impact India’s already fragile economy. India currently enjoys a large trade surplus with the US.

The Indian government attempted to address the slowdown with income tax relief for the middle class and a benchmark interest rate cut by the central bank. However, economists are skeptical about the effectiveness of these measures. Professor Kaushik Basu of Cornell University highlights the lack of post-pandemic recovery for a large segment of the population, many of whom remain in low-paying agricultural jobs after returning from urban centers during lockdowns.

Economists predict limited impact from the tax relief, estimating a mere 0.2 percent boost to GDP. They argue that the measures are short-term fixes that fail to address fundamental issues such as high unemployment, underemployment, and the lack of investment in skills development. Only about 2 percent of Indians currently pay income tax.

While India’s robust domestic consumption has cushioned the blow, experts warn of the growing inequality, unseen since independence in 1947. Government spending on infrastructure, while positive, is constrained by the need to reduce the fiscal deficit. Further pressure comes from high US tariffs on steel imports.

The situation highlights a need for broader economic reforms, similar to those implemented in 1991. Experts suggest addressing inequality through higher taxes on the super-rich and simplifying regulations for small businesses. While the government projects a growth rate of 6.7 percent for the coming year, the focus should shift towards increasing per capita income and its equitable distribution, according to economists. The meeting between Modi and Trump underscores the complex interplay between international trade relations and India’s internal economic struggles.

Read More