Meanwhile, the services sector and construction activity are performing strongly, with manufacturing sales exceeding the previous two-year levels, indicating overall economic resilience.

Nageswaran suggests that removing tariff uncertainties could boost growth in the third and fourth quarters, possibly offsetting the second quarter's setbacks.

India's economy is projected to grow between 6.3% and 6.8% this financial year, supported by robust domestic demand despite tariff-related uncertainties.

Chief Economic Advisor V Anantha Nageswaran highlights that the 50% US tariff on Indian goods presents a short-term risk to growth, but expects this impact to be temporary.

The recent US 25% penal tariff, imposed from August 27, is expected to mainly affect manufacturing in the second quarter, potentially causing some negative growth shocks.

Despite external pressures, India's trade activity remains resilient, with exports and net services exports growing above pre-Covid levels in the first quarter of FY26.