Will US tariffs impact India's growth? S&P Global Ratings weighs in
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Synopsis
The recent US tariff announcements have raised questions, but S&P Global Ratings reassures that India's growth trajectory remains intact. With strong economic fundamentals and exempt industries, India's resilience shines through amidst global trade tensions.
Key Takeaways
- US tariffs are not expected to harm India's economic growth.
- India's GDP growth forecast remains at 6.5%.
- Key export sectors like pharmaceuticals are exempt from tariffs.
- India's middle class continues to attract global investment.
- India's trade surplus with the US is significant.
New Delhi, Aug 13 (NationPress) The latest tariffs introduced by President Donald Trump are not expected to hinder India’s economic growth or compromise its positive sovereign rating outlook, according to a statement made by S&P Global Ratings on Wednesday.
In May of the previous year, S&P upgraded its outlook on India’s sovereign rating from ‘BBB-’ to positive, citing robust and consistent economic growth.
On August 6, President Trump revealed an additional 25 percent tariff on all imports from India, which is in addition to an existing 25 percent duty.
This adjustment will elevate the total tariff to 50 percent starting August 27. The White House indicated that this decision was a response to India's ongoing importation of Russian oil.
During a webinar focused on Asia-Pacific Sovereign Ratings, S&P Global Ratings Director YeeFarn Phua commented that India is unlikely to experience significant repercussions as it is not predominantly a trade-driven economy.
He elaborated that India’s exports to the US constitute merely around 2 percent of its GDP.
Additionally, he highlighted that crucial export sectors like pharmaceuticals and consumer electronics are exempt from these tariffs.
“In the long run, we don’t anticipate this will severely impact India’s economy, hence the positive outlook for India remains intact,” he remarked.
S&P forecasts India’s GDP to expand by 6.5 percent in the current financial year, matching last year’s growth rate.
YeeFarn further emphasized that numerous global corporations are establishing operations in India as part of the ‘China plus one’ strategy, primarily to cater to the substantial domestic market rather than relying on exports to the US.
He noted that India’s expanding middle class serves as a significant attraction for investors. Currently, the US holds the position as India’s largest trading partner.
In 2024-25, bilateral trade between the two nations reached USD 186 billion. India exported goods valued at USD 86.5 billion to the US, while imports were recorded at USD 45.3 billion.
India also sustained a trade surplus with the US amounting to USD 41 billion during this period.
Point of View
It is clear that while global trade dynamics are shifting, India's economic foundation remains robust. The government's proactive approach in fostering a diverse economy ensures that the nation can weather these changes, solidifying its position as a significant player on the global stage.
NationPress
19/08/2025
Frequently Asked Questions
Will US tariffs significantly impact India's economy?
No, experts from S&P Global Ratings indicate that the tariffs will not have a substantial effect on India's economic growth due to its low reliance on exports to the US.
What sectors are exempt from the new US tariffs?
Key sectors such as pharmaceuticals and consumer electronics are exempt from these tariffs, which mitigates their potential impact on India's economy.
What is the expected GDP growth for India this year?
S&P Global Ratings expects India’s GDP to grow by 6.5% in the current financial year, maintaining the same growth rate as the previous year.
Why is India still attractive to global investors?
India’s expanding middle class and the 'China plus one' strategy adopted by many global companies make it an attractive destination for investment.
What was the trade surplus between India and the US?
India maintained a trade surplus of USD 41 billion with the US during the 2024-25 period.
