Indian companies are grappling with the steepest earnings downgrades in Asia as analysts trim forecasts, citing the impact of higher U.S. tariffs. Forward 12-month earnings projections for India’s large and mid-cap firms have been cut by 1.2% over the past two weeks, the biggest decline in the region, according to LSEG IBES data.
The reductions follow another weak corporate earnings season, continuing a slowdown that began last year and has weighed heavily on benchmark indexes. While India’s economy remains largely domestic, with Nifty 50 companies earning just 9% of their revenue from the U.S., the new tariff regime — reaching as high as 50% — is seen as a major threat to growth.
Analysts at MUFG estimate that prolonged tariffs of this scale could shave off a full percentage point from India’s GDP growth, particularly hurting labor-intensive sectors such as textiles. In response, Prime Minister Narendra Modi’s government has unveiled broad tax reforms aimed at stimulating domestic consumption, offering some relief as global trade tensions intensify.
Still, investors remain cautious. “It’s an interesting period given the tariffs imposed on India,” said Raisah Rasid, global market strategist at J.P. Morgan Asset Management. She noted that valuations remain stretched, and tariffs could trigger a re-rating that might make domestic-focused stocks more appealing in the long run.
Earnings growth for Indian firms has already been subdued, stuck in single digits for five consecutive quarters, a stark contrast to the 15%–25% expansion recorded between 2020–21 and 2023–24. Following April-June results, earnings forecasts were slashed most sharply for sectors such as automobiles, capital goods, food and beverages, and consumer durables, each cut by around 1% or more.
On the macroeconomic side, economists at Standard Chartered expect the government’s tax cuts to lift GDP growth by 0.35–0.45 percentage points by fiscal year 2027. India’s real GDP growth averaged 8.8% between 2022 and 2024, the strongest in Asia-Pacific, but is projected to moderate to 6.8% annually over the next three years.
Meanwhile, India’s equity appeal has faded rapidly. A Bank of America survey revealed that the country dropped from being the most-preferred Asian equity market to the least-preferred in just two months. As Rajat Agarwal, Asia equity strategist at Societe Generale, observed: “After disappointing earnings growth of only 6% in 2024, the recovery remains sluggish in 2025.”
