Trump tariffs, falling rupee: Key risks to India's growth story; can the Budget protect it?

India is the world’s fastest increasing system - with an implicit 6-7% GDP maturation complaint - the world’s 5th largest system is driving planetary growth. The International Monetary Fund (IMF) has acknowledged India arsenic a cardinal maturation motor for the world.

But amidst expanding geopolitical and economical risks, particularly US President Donald Trump’s argumentation uncertainty and tariff war, India’s maturation communicative faces outer headwinds.Even arsenic India’s GDP maturation has beaten forecasts truthful acold this fiscal twelvemonth - the large question is tin it proceed to turn good amidst the planetary economical storm? Indian banal markets had a mediocre 2025, the rupee was the worst performing currency successful 2025, and an India-US commercialized woody is yet to beryllium finalised.

Adding to injury, India faces 50% tariffs from the Trump administration, denting its exports. India’s maturation is majorly home driven, yet planetary turbulence plays a cardinal relation successful an progressively interconnected world.In this backdrop, Finance Minister Nirmala Sitharaman’s Union Budget 2026 assumes significance. What are the risks to India’s robust and resilient maturation story, and what tin Budget 2026 bash to mitigate them? We inquire economists:

What Are The Biggest Risks To India’s Growth Story?

Most economists surveyed by the Times of India Online constituent to 2 main risks: rupee depreciation, and Trump’s commercialized warfare and tariffs. The challenging outer situation whitethorn measurement connected India’s maturation story, adjacent though it is mostly home request driven.

Economists judge that the rupee's escaped autumn whitethorn pb to imported inflation. They accent the request for the authorities to instrumentality to the way of fiscal credibility. Economists pass of commercialized and tariff-led shocks unless an India-US commercialized woody is finalised. Madan Sabnavis, Chief Economist astatine Bank of Baroda doesn’t spot immoderate home headwinds. “The Indian economy is mostly a home system and present we bash not spot immoderate large hazard too the accustomed presumption of a mean monsoon.

The hazard connected the outer broadside is inactive successful the realm of tariffs arsenic the affected industries are babelike connected export markets of which the USA is simply a large player. This tin beryllium addressed by incentives connected the recognition broadside arsenic good arsenic nonstop enactment based connected performance,” helium tells TOI.

Yuvika Singhal, Economist astatine QuantEco tells TOI, “The biggest macro hazard India faces is from planetary uncertainty and rupee depreciation. In a planetary situation marked by heightened escalation of commercialized wars and economical argumentation uncertainty, it is indispensable to stay steadfast towards preserving home macro stability.”Ranen Banerjee, Partner, Government Sector Leader astatine PwC India agrees that the macroeconomic risks that India faces is connected the speech complaint beforehand arsenic successful the lawsuit the outflow of superior continues combined with headwinds to exports, the currency volition beryllium nether pressure. “This could inflate the import bills and provender into ostentation and enactment unit connected the existent relationship balance. Since the monetary argumentation is extracurricular the purview of the budget, the lone mode the fund tin enactment the macro is done continued adherence to fiscal prudence by keeping the shortage successful check, reducing the indebtedness GDP ratio and keeping the prime of budgetary walk high,” helium explains.Sujan Hajra, Chief Economist & Executive Director astatine Anand Rathi Group says that the biggest macro hazard helium sees successful FY27 is the commercialized daze from higher US tariffs, fixed India’s export dependence connected a fewer precocious economies.According to Rumki Majumdar, Economist astatine Deloitte India the biggest risks to India’s maturation communicative are anemic recognition transmission contempt RBI easing (MSME/household lending lag), ostentation resurgence arsenic request accelerates (imported ostentation from tariffs/INR depreciation), fiscal unit from slower revenues amid outer headwinds and reforms, and outer shocks specified arsenic tariff hikes, FPI outflows, currency volatility; delayed India–US commercialized deal.

For Dr DK Srivastava, Chief Policy Advisor, EY India buoyancy of taxation collections is simply a origin that the authorities should support successful mind. “GST collections volition spell down and proceed to stay debased adjacent successful the adjacent year. So determination is simply a hazard to fiscal consolidation that whitethorn emanate due to the fact that of the information that GST revisions took spot and the complaint effect has been immediate. The anticipation was that the taxation basal volition amended arsenic depletion request improves, but though it is improving, it is not capable to hitch retired the GST reduction.

This volition person an interaction connected the budgetary, fiscal consolidation. So that is 1 hazard to the other,” helium tells TOI.Yet different origin helium points to is: longer word hazard related to household fiscal savings that person been falling comparative to GDP implicit clip now.Rishi Shah, Partner and Economic Advisory Services Leader astatine Grant Thornton Bharat flags the volatile geopolitical environment, fragmented planetary commercialized and progressively fragile superior flows arsenic risks for India.

“While spending connected AI and exertion has supported maturation crossed developed markets, this rhythm seems constrictive and perchance vulnerable. Any disruption could trigger risk-off behaviour, with superior flowing backmost to perceived harmless havens, raising volatility successful emerging-market currencies and plus prices,” helium says.Sachchidanand Shukla - Group Chief Economist astatine Larsen & Toubro besides cautions that resurgence of geopolitical risks and uncertainty implicit tariffs adjacent though the IMF’s World Economic Outlook of January 2026 hints that the planetary system has shaken disconnected this daze are risks.

What Can Budget 2026 Do To Mitigate Macro Risks?

Crediting the authorities for sticking to the fiscal consolidation path, Yuvika Singhal says, “Post the archetypal COVID shock, India has displayed singular fiscal prudence successful gradually scaling backmost the pandemic-era stimulus on with reinvigorating appetite for reforms. It is besides imperative that the entrepreneurs’ carnal spirits are rekindled to physique existent businesses. On the fiscal side, though the level of deficit/debt for India remains higher than that of its peers successful advanced/emerging economies, the resoluteness and the gait of fiscal consolidation has been commendable.

”“We judge the authorities should uphold the ethos of prudent fiscal consolidation and people a 1 percent constituent simplification successful its Gross Debt-to-GDP ratio from 56.1% successful FY26 BE to 55.1% successful FY27. Assuming Nominal GDP to turn by 10.0-10.5% successful FY27, this could construe into an effectual fiscal shortage scope of 4.1-4.3% of GDP. In our opinion, the broader fiscal arithmetic would beryllium formulated with an implied baseline people of 4.2% fiscal deficit/GDP ratio, which volition supply two-way fiscal flexibility to the government.

If maturation momentum disappoints, past fiscal compression could spell easy, with the shortage veering towards 4.3% of GDP by the extremity of FY27. On the different hand, if maturation momentum surprises connected the upside, the authorities could utilize the accidental to deepen the counter-cyclical thrust by tightening the fiscal shortage to 4.1% of GDP by the extremity of FY27,” she adds.Sujan Hajra of Anand Rathi Group explains that since exports enactment implicit 40 cardinal jobs, Budget 2026 needs to absorption connected targeted enactment for labour-intensive sectors specified arsenic textiles, leather and electronics to support employment and competitiveness.“At the aforesaid time, the crisp summation successful payment spending by states is crowding retired productive capex, with gross expenditure dominating authorities budgets. The Budget tin code this by linking cardinal loans and further borrowing abstraction to capex utilisation, portion creating capex-linked incentives for states, ensuring fiscal enactment strengthens medium-term maturation alternatively than consumption-led pressures,” helium tells TOI.

Rumki Majumdar of Deloitte India prescribes the pursuing responses from Budget 2026 for the economy:

Rishi Shah of Grant Thornton Bharat feels that Budget 2026 should prioritise resilience and sustainability. “Maintaining a beardown pipeline of nationalist superior expenditure remains captious to anchor maturation and assemblage successful backstage concern erstwhile planetary superior flows crook cautious. At the aforesaid time, improving ratio of expenditure and maintaining credible shortage trajectories volition beryllium cardinal to preserving capitalist confidence. Finally, a sustained propulsion connected productivity, innovation and capableness building—rather than incremental incentives—will beryllium indispensable to guarantee durable, domestically driven maturation that tin withstand outer shocks,” helium tells TOI.