Synopsis
According to a recent SBI Research report, India's exports to the US, which account for just 4% of its GDP, will face limited impact from the 27% tariff increase. India enjoys the lowest tariffs among Asian countries, presenting a competitive advantage in various sectors despite challenges in textiles and engineering goods.Key Takeaways
- India's exports to the US are only 4% of GDP.
- The 27% tariff hike has a limited impact.
- India has the lowest tariffs compared to Asian rivals.
- Textile and engineering sectors may face short-term challenges.
- Long-term benefits expected in agriculture and seafood exports.
New Delhi, April 4 (NationPress) India's exports to the US account for only 4 percent of its GDP, meaning the direct consequence of the 27 percent tariff increase on Indian goods, as announced by President Donald Trump, will have a "limited" impact, according to a report from SBI Research published on Friday.
Furthermore, the tariffs imposed on Indian products are the lowest among its Asian rivals, with 34 percent on China, 36 percent on Thailand, 32 percent on Indonesia, and 46 percent on Vietnam. This scenario is anticipated to provide India with a comparative edge over these nations and potentially boost exports in specific sectors over the long run, the report indicated.
According to the SBI report, "We expect India to have a competitive advantage and an export-oriented impact across various sectors."
The increased tariffs on textile-exporting nations like Bangladesh, China, and Vietnam may result in diminished demand due to inflationary effects. However, in the long term, India is positioned to capture a larger market share. India’s textile exports to the USA were approximately $7 billion during April-December of FY25. Although this sector might face short-term challenges, the report suggests a potential positive long-term outcome.
The engineering goods sector is likely to suffer considerably due to supply chain disruptions and reduced export revenues.
In the electronics sector, with China facing tariffs ranging from 54 percent to 79 percent, India finds itself in a more favorable position compared to key electronics exporting nations. India's electronics exports to the US were valued at around $9 billion from April to December in FY25, representing the highest share of 15 percent in total exports.
The gems and jewellery sector is expected to be most adversely affected, as import tariffs could reach 20 percent from the current 0 percent on loose diamonds and 5.5-7 percent on gold jewellery. The US constitutes nearly $10 billion or 30.4 percent of India's annual gems and jewellery exports, which total $32 billion, the report highlights.
India’s agricultural exports to the US are projected to remain stable or even expand as competing nations face higher duties. India's seafood exports to the US reached $1.5 billion during April-December of FY25, accounting for 3 percent of total exports. India's relative tariff advantage is expected to benefit seafood exporters, as consumption will not see an immediate decline, according to the SBI report.
Since FY23, India's exports to the US have been on a declining trajectory, with their share in total exports hovering around 17-18 percent. The top 15 items exported to the US represented 63 percent of total exports, as per the report.
The overall impact on the Indian economy will be more significantly influenced by a general slowdown in global growth and increased financial volatility due to the worldwide tariff hikes, the report concluded.
