Indian companies have recorded the steepest earnings downgrades in Asia as analysts slash forecasts in response to steep US tariffs, even as New Delhi unveils domestic tax cuts to soften the blow.

Forward 12-month earnings estimates for India’s large and mid-cap firms fell by 1.2% in the past two weeks, according to LSEG IBES data — the sharpest cut in the region.

India’s economy is mainly domestic, with Nifty 50 firms earning just 9% of revenues from the US. But tariffs of up to 50% on Indian exports threaten growth.

MUFG estimates the sustained levy could shave one percentage point off GDP growth, hitting employment-heavy sectors like textiles hardest.

Prime Minister Narendra Modi has announced sweeping tax reforms to bolster domestic demand. Economists at Standard Chartered forecast these measures could add 0.35–0.45 percentage points to GDP growth by fiscal 2027.

Still, investor sentiment has soured. Bank of America’s fund manager survey shows India has slipped from the most-favoured to the least-preferred Asian equity market within two months.

Earnings growth has been stuck in single digits for five straight quarters, far below the 15%–25% seen between 2020 and 2024. Analysts cut forecasts for autos, capital goods, food, and consumer durables by more than 1% after April–June results.

“Valuations are still elevated, and tariffs could trigger a re-rating downwards,” said Raisah Rasid of J.P. Morgan Asset Management.

India’s GDP, which grew 8.8% annually between 2022 and 2024, is projected to slow to 6.8% over the next three years.