Davos 2026: Tariffs could knock off 0.7 percentage points from India's growth, warns Gita Gopinath

Global growth projections remain a useful guide but must be read with caution in an increasingly volatile trade environment, according to former IMF Deputy Managing Director Gita Gopinath, who said higher tariffs could shave around 0.7 percentage points off India’s growth over a two-year period.

Speaking to Rajdeep Sardesai on the sidelines of the World Economic Forum in Davos, Gopinath said IMF projections continue to offer a reasonable benchmark, even as uncertainty clouds the global outlook.

“It is a good, useful indicator,” Gopinath said, responding to a question on whether IMF growth forecasts still hold in a Trump-driven global order. “I have to say that 2025 played out about what was projected for the world. They predicted 3.2 and it ended up 3.3, slightly better, but the ballpark was really good.”

“So, it is a useful number to keep in mind,” she added. “But that said, we are certainly playing the roulette rule quite a bit these days and hoping for the global economy to all hang together.”

Asked whether India’s status as the fastest-growing large economy and its strong domestic demand could insulate it from global headwinds, Gopinath struck a cautious note. “In terms of estimates of what the tariffs will do for India is about it will knock off something about 0.7 percentage points from growth over a two-year period,” she said.

She explained that some adjustment has already taken place through trade diversion. “What you’ve seen is a lot of exports from India that were previously going to the US were redirected to other markets, including the Middle East, other countries,” Gopinath said.

The economist added that similar patterns were visible elsewhere. “Similarly, China redirected a bunch of flows that were trade that was going to the US to other countries in Asia, in Europe, and some of it, of course, has found a way back into the US,” she said.

However, Gopinath cautioned against assuming such shifts can fully offset the impact of tariffs. “This is not a sustainable situation,” she said. “I don’t think we will all very simply easily pivot away from the US and sell to other markets, and therefore we don’t need to worry about the consequences,” she added.

The professor underlined the importance of the US market in global trade. “The US is a large market,” she said. “It does matter if you have very high levels of tariffs with the US.”

She said resolving the issue would ultimately require political engagement at the highest level. “How this gets solved is going to come down to the two heads of state, President Donald Trump and Prime Minister Narendra Modi, a discussion at that level,” Gopinath said.