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US-India trade war may shave off 1% from GDP: Ad spend to be first casualty?
While sectors like textiles, pharma feel the heat, experts say that festive demand and India’s policy response will determine how sharply AdEx is hit in the medium to long term
India’s economy could be staring at a 0.4% to 1% slowdown in GDP growth over the next 12 months as its trade tensions with the United States escalate, according to projections from the world’s top rating agencies. The Indian government, in its May estimates, pegged real GDP growth at 6.5% for FY 2024–25. The ongoing tariff war now threatens to pull that figure below 6%.
On August 6, the US government announced an additional 25% tariff on all Indian imports—on top of the existing 25% duty—effective August 27.
Barclays says these tariffs have already exerted a 0.4% drag on GDP and could inflict “an additional hit of c.1%” due to further hikes and delayed effects. Morgan Stanley pegs the impact at 0.4–0.8 percentage points if the elevated tariffs persist without relief. Moody’s expects GDP growth to ease by about 30 basis points to 60 this fiscal if the US follows through with the 50% duty.
“With the festive season approaching and brands finalising media plans for the season, the US–India tariff standoff adds a fresh layer of uncertainty. For CMOs and media planners, the coming months may demand sharper allocation strategies, more cautious budgeting, and a watchful eye on macro data,” ad executives told e4m.
Why AdEx Could Bear The Brunt
In India, GDP growth has long been a reliable bellwether for advertising expenditure (AdEx). Historically, AdEx growth has tended to outpace GDP growth by a factor of 1.5 — meaning a 6% GDP expansion often translates into around 9% growth in ad spend. That relationship, however, works in reverse during slowdowns. A GDP dip of even 0.5 to 1 percentage point could pull AdEx growth down by 0.75 to 1.5 percentage points — a meaningful cut in a ?1 lakh crore-plus market.
“The common factor between GDP and AdEx growth is consumption. And consumption softens due to inflation and other macroeconomic factors. In such times, companies curtail their discretionary spends and AdEx is usually the first casualty,” a brand leader told e4m.
GDP and AdEx trends over the last five years, compiled by e4m, suggest a clear correlation between them, even if not to the full extent of the 1.5x multiplier.
The Pitch Madison Advertising Report (PMAR) 2025 forecasts an 11 percent rise in India’s AdEx for 2025, as against the 9 percent growth a year ago. While rural and urban consumption have lifted conditions in H1 2025, the escalating US–India tariff war now risks stalling the economy’s growth engine, potentially derailing momentum in the advertising sector and leaving PMAR’s projections short of target.
Shradha Agarwal, Co-founder and Global CEO of Grapes Worldwide, says, “High tariffs are likely to fuel economic uncertainty, creating a ripple effect in the advertising and marketing industry. Businesses may tighten media budgets during the festive season, with many brands scaling back large-scale campaigns to protect profit margins.”
Brands will need to take a more strategic approach, prioritizing performance-driven marketing over pure brand-building campaigns, Agarwal highlights, “By focusing on clear, measurable ROI, they can optimize festive season campaigns for maximum results. Allocating higher budgets to digital channels will provide greater control over clicks, conversions, and direct sales. Additionally, leveraging influencer marketing can enhance targeted reach while offering a cost-effective way to boost sales and engagement."
Some experts believe instead of budget cuts, companies would prefer cautious spending due to the impending festive season. Sahil Shah, CEO, dentsu Creative Isobar, said, "There will certainly be an impact, but it will be limited to specific sectors—particularly export-oriented businesses dependent on US markets. Beyond that, the effect may be camouflaged by the festive season, which typically drives higher consumption.”
“In the short term, over the next few months, I don’t expect a dip in consumption because India’s festive season is a major driver of spending. As a result, marketers are unlikely to slash budgets drastically; they’ll be cautious and monitor the situation, but not cut ‘like nobody’s business’.”
“From a medium-term perspective, we may see certain bets being re-evaluated and resources reshuffled, depending entirely on how the trade war plays out. But right now, both content and actual consumption remain steady,” he noted.
“GDP impact figures are only estimates. India’s large domestic market, coupled with growing FMCG consumption, an expected urban demand pickup during the festive season, and a reasonably good monsoon, all point towards a positive outlook for AdEx,” says Ashish Bhasin, founder of Bhasin Consulting, echoing the sentiments.
Bhasin noted that around 60% of India’s economy is agrarian, and categories like FMCG, mobile, and auto will continue to advertise. “Even if exports face pressure, the domestic momentum should more than compensate. I expect the second half of the year to be particularly strong for advertising in India.”
The affected brands are largely exporters to the US and don’t advertise heavily in India. The impact is limited to a few categories, and many will seek new markets to offset losses—leveraging India’s FTAs with the UK and TEPA with EFTA nations to boost exports, says Nimesh Shah, Head Maven, Windchimes.
Shah explains, “On the contrary, strong domestic demand and the festive season could spur brands to push sales locally. If the government seizes this moment to cut red tape and improve ease of business, we could see robust advertising and sales in the year’s final months. Slowing demand in Western markets may even drive international brands to invest and advertise more in India and Asia, further lifting demand here.”
Marketers say that India’s policy response will ultimately decide how sharply growth, inflation, and AdEx are affected.
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