US President Donald Trump seems to be escalating his tariff war on India. He has again threatened substantial tariffs against the country for purchasing Russian oil and “selling it on the open market for big profits”. Trump had last week announced a 25% duty on all Indian goods in addition to a penalty for buying a “vast majority” of Russian military equipment and crude oil. Though India has not announced any tit-for-tat tariffs, the India-US trade stalemate seems to be worsening. India is not submitting to Trump’s threats. It has called out the hypocrisy of the US and EU for continuing to import various goods from Russia while pressuring India not to do so. Risks to India’s economy and businesses can blow up if Trump slaps more tariffs on India.
However, all the gloom spread by Trump’s tariff threats has failed to deter new businesses in India. Fresh registrations of companies rose for the seventh straight month in July and those of limited liability partnerships surged for five months in a row, said an ET report citing the latest corporate affairs ministry data.
As many as 17,555 companies, including overseas entities, were incorporated in July, an 18% increase from 14,887 a year earlier. Similarly, the number of LLPs that got registered in July rose by a quarter to 7,343. Between April and July, the number of companies that got incorporated jumped over 26% from a year before to 78,696, the data showed. During this period, 30,411 LLPs got registered, a 29% rise from a year before.
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Why are new businesses bullish on India?
Despite the external threats such as tariffs and domestic challenges such as low demand, India is still projected to retain its status as the world’s fastest-growing major economy this fiscal year and the next.
The International Monetary Fund (IMF) last week raised India’s economic growth forecast to 6.4% for both FY26 and FY27, citing a more favourable external environment than anticipated in the April outlook. The earlier projections stood at 6.2% for FY26 and 6.3% for FY27. But Trump’s 25% tariffs are likely to hit GDP growth. However, economists have said tariffs could dent India’s GDP growth by 20-30 basis points this fiscal year, but the higher duty is unlikely to significantly impact the country’s domestic demand-driven economy.
India’s economy enters the second quarter of FY26 on a relatively firm footing, as the first quarter of FY26 presents a picture of resilient domestic supply and demand fundamentals with inflation remaining within the target range and monsoon progress on track, said a Finance Ministry report last month. The economy has the look and feel of “steady as she goes” as far as FY26 is concerned, the Finance Ministry’s Monthly Economic Review for June said, even though it pointed out downside risks.
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“The Indian economy in mid-2025 presents a picture of cautious optimism,” the review said. “Despite global headwinds marked by trade tensions, geopolitical volatility, and external uncertainties, India’s macroeconomic fundamentals have remained resilient. Aided by robust domestic demand, fiscal prudence and monetary support, India appears poised to continue as one of the fastest-growing major economies, with various forecasters, including S&P, ICRA, and the RBI’s Survey of Professional Forecasters, projecting GDP growth rates for FY26 in the range of 6.2 per cent and 6.5 per cent.”
The Finance Ministry report also indicated room for further rate cuts for the RBI. “Core inflation remains subdued, and overall inflation is comfortably below the RBI’s 4 per cent target, affording room for the easing cycle to be sustained,” it said. A global slowdown could further dampen demand for Indian exports and continued uncertainty on US tariffs may weigh on the country’s trade performance in coming quarters, the finance ministry review said.
Though 25% US tariffs and possibly higher as Trump has threatened will certainly dilute the positive outlook, a trade deal with the US this year can’t be ruled out even as other trade agreements will create new avenues for Indian exports.
Global CEOs are betting on India
Executives across companies said there is a visible revival of demand in India after months of slowing sales. They are tapping into this recovery with more investments, distribution, equipment and innovation, ET has reported recently.
Apple chief executive Tim Cook said growth in India accelerated in the June quarter with the iPhone maker reporting record revenue driven by double-digit expansion in smartphones, Macs and services. It’s not just Apple that’s upbeat on India. A dozen global chiefs of large companies such as Coca-Cola, Unilever, Reckitt Benckiser, PepsiCo, Nestle, Mondelez, Whirlpool, LG, Domino’s, AO Smith and FedEx have renewed their bet on the country after a challenging phase. The CEOs were speaking on earnings calls for the last quarter.
India is a key growth market for global companies given that various large categories are still underserved. Companies said they are increasing their focus on India with the revival of demand visible after unseasonal rains and geopolitical tensions weighed down sales since March.
The overall household consumption is set to pick up in the next two to three quarters on rural strength, a Swiss brokerage said on Tuesday. Softened inflation, which boosts purchasing power, improving crop outlook on good monsoons and a USD 20 billion social welfare spends on women are set to strengthen rural consumption, UBS Securities said in a report. Urban consumption will “stabilise” on aspects like RBI’s rate cuts, USD 10 billion of policy stimulus through personal income tax changes and improved availability of credit, it said.
Confederation of Indian Industry (CII) President, Rajiv Memani, has countered prevailing market sentiment about private capital expenditure, asserting that while there’s a perception of a slowdown, private capex is actually taking place across various industry sectors in the country. “There’s an atmosphere suggesting that private capex is not happening, but actually capex is happening,” Memani said last month, citing data showing consistent private investment over the past three years. The CII President pointed to robust corporate fundamentals as evidence of ongoing investment activity. “If you look at listed companies and attend their AGMs, you’ll find that CII members are looking to increase capex. Everyone has strong balance sheets, low debt, and the ability to raise funds from public markets,” he said.
While external risks and domestic uncertainties do pose challenges to economic growth, India’s structural story remains resurgent which gives confidence to new businesses as well as top companies.