Sign in Subscribe
Tariffs

Trump's Tariffs Unlikely to Hit India's Growth, Says S&P Global Ratings

Strategic Insights

— 2 min read

S&P Global Ratings director YeeFarn Phua believes that the US tariffs imposed on India are unlikely to have a significant impact on the country's economy, given its limited trade-oriented economic structure and minimal trade dependence on the US. The tariffs, which total 50% (25% base tariff + 25% additional tariff for India's crude oil trade with Russia), are aimed at penalizing India for its ongoing procurement of Russian oil.

However, India's economy remains stable, with a positive sovereign ratings outlook, according to S&P. The agency projects India's GDP growth to remain steady at 6.5% in the ongoing fiscal year, matching the previous financial year's performance. Significant export sectors to the US, including pharmaceuticals and consumer electronics, remain unaffected by Trump's tariff moves.

"We don't think this (higher tariffs) will be a big hit (on India's economy), and therefore, the positive outlook on India remains," YeeFarn said at a Webinar on Asia-Pacific Sovereign Ratings. He also noted that many businesses have implemented the 'China plus one' strategy in recent years, establishing operations in India primarily to serve the local market.

Key Takeaways:

  • India's economy remains stable, with a positive sovereign ratings outlook, according to S&P Global Ratings.
  • The US tariffs imposed on India are unlikely to have a significant impact on the country's economy, given its limited trade-oriented economic structure and minimal trade dependence on the US.
  • S&P projects India's GDP growth to remain steady at 6.5% in the ongoing fiscal year, matching the previous financial year's performance.
  • Significant export sectors to the US, including pharmaceuticals and consumer electronics, remain unaffected by Trump's tariff moves.
  • India maintains a favourable trade balance with the US, recording a surplus of $35.32 billion in goods during 2023-24 and $41 billion in 2024-25.
  • The bilateral trade between India and the US totalled $186 billion in 2024-25, with India's exports to the US valued at $86.5 billion and imports at $45.3 billion.
  • The ongoing trade negotiations between India and the US have hit a bump over India's stance of not opening its agricultural and dairy sectors to American products.
  • Trump's tariffs on India's crude oil imports are aimed at pressuring Russian President Vladimir Putin to end the Russia-Ukraine conflict.

Statistics:

  • S&P projects India's GDP growth to remain steady at 6.5% in the ongoing fiscal year, matching the previous financial year's performance.
  • India's exposure to the US in terms of exports to GDP is just about 2%.
  • The US contributed approximately 18% to India's overall goods exports, whilst accounting for 6.22% of imports and 10.73% of bilateral trade in 2021-25.
  • India maintained a favourable trade balance with the US, recording a surplus of $35.32 billion in goods during 2023-24 and $41 billion in 2024-25.
  • The bilateral trade between India and the US totalled $186 billion in 2024-25.
  • India's exports to the US amounted to $86.5 billion, whilst imports were valued at $45.3 billion, during 2024-25.

Sources:

  • PTI report on S&P Global Ratings director YeeFarn Phua's statement on India's economy and US tariffs.
  • Article titled "Why US tariffs are unlikely to hit India's growth story" published by TOI Business Desk.
  • Report titled "India-US Trade" published by TOI Business Desk.

Read more