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India's opposition blames Modi government for diplomatic

failure

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Rupee, equity indexes fall after Trump's tariff threat

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Economists warn tariffs may hurt growth, manufacturing

ambitions

By Manoj Kumar and Nikunj Ohri

NEW DELHI, July 31 (Reuters) - Indian opposition parties

criticised the government on Thursday, describing U.S. President

Donald Trump's threat of a 25% tariff as a diplomatic failure

for New Delhi, while the rupee currency tumbled and equity

indexes slid in response to the news.

The 25% rate would single out India more harshly than other

major trading partners, and threatens to unravel months of

talks, undermining one of Washington's strategic partners in the

region, viewed as a counterbalance to China.

Trump said the tariff on goods imports from India would

start from Friday, in addition to an unspecified penalty for

Russian dealings and involvement in the BRICS grouping of

nations, but added later that trade talks continued.

In response, the government of Prime Minister Narendra Modi

said it was studying the implications of Trump's remarks and was

dedicated to securing a fair trade deal.

"This development reflects a broader collapse of foreign

policy under the Modi government," a lawmaker of the main

opposition Congress said in a notice asking for a discussion of

the matter in the lower house.

The debate would focus on the "government's economic and

diplomatic failure in preventing the imposition of 25% U.S.

tariffs plus penalties on Indian exports," it added.

Commerce Minister Piyush Goyal is expected to brief the

lower house later on Thursday, television news channels said.

Economists warned the steep tariff could hurt India's

manufacturing ambitions and trim up to 40 basis points from

economic growth in the financial year to March 2026.

India's benchmark equity indices, the Nifty 50 and

BSE Sensex, fell about 0.6% each, while the rupee

declined to 87.74, its lowest in more than five months, before

paring losses.

India has received a "raw deal", said Priyanka Kishore, an

economist at Asia Decoded.

"While further trade talks may bring the tariff rate down,

it appears unlikely that India will secure a significantly

better outcome than its eastern neighbours," she added.

That would raise questions about India's relative appeal as

a China plus one destination, she said, referring to a strategy

of diversifying supply chains through manufacturing outside

China to reduce geopolitical and operational risks.

Trade talks continued, Trump said on social media, however,

as nations face a Friday deadline to strike deals on reciprocal

tariffs or have a U.S. tariff slapped on their exports.

The U.S. levy on India exceeds those achieved by some other

nations in deals with the Trump administration. For example, the

tariff on Vietnam is set at 20% and on Indonesia at 19%, with

levies of 15% on Japanese and European Union exports.

On Wednesday, Trump said Washington had reached a trade deal

with India's arch-rival Pakistan that Islamabad said would lead

to lower tariffs on its exports, but neither side have yet

revealed the agreed rate.

Since India's short but deadly conflict with Pakistan in

May, New Delhi has been unhappy about Trump's closeness with

Islamabad and has protested, casting a shadow over trade talks.

Despite former public displays of bonhomie between Trump and

Modi, India has taken a slightly harder stance against the

United States in recent weeks.

Trump has repeatedly taken credit for the India-Pakistan

ceasefire he announced on social media on May 10, but India

disputes his claim that it resulted from his intervention and

trade threats.

"The country is now bearing the cost of Narendra Modi's

friendship," Congress said.

The United States, the world's largest economy, now has a

trade deficit of $45.7 billion with India, the fifth largest.

Russia remained India's top oil supplier during the first

six months of 2025, accounting for 35% of overall supplies.

"I don't care what India does with Russia," Trump said in a

Truth Social post on Thursday, adding, "They can take their dead

economies down together, for all I care."

(Writing by Sudipto Ganguly in Mumbai; Editing by Clarence

Fernandez)