How Does India's Resilience Shine Amid Global Tariff Challenges?

New Delhi, Sep 10 (NationPress) India's economy exhibits strong resilience despite the ongoing global trade and fiscal challenges, bolstered by vigorous domestic consumption and government expenditure, according to a report released on Wednesday.

The analysis from SBI Capital Market noted that the Indian markets have remained remarkably resilient, even as the stringent tariff policies of the United States pose significant challenges worldwide.

"India surprisingly maintained a robust performance in Q1, achieving a GDP growth rate above expectations. It is widely acknowledged that in the face of global challenges stemming from high tariffs imposed on India, there is a pressing need for a stimulus in domestic consumption. The GST reform is a positive step in that direction," the report stated.

A ruling by a US appeals court declared the tariffs unconstitutional, escalating the matter to the Supreme Court. The report emphasized, "Until there is clarity, trade-policy volatility is likely to remain high, with critical pressure points in sectors such as autos, electronics, and textiles."

Indian exporters are facing reciprocal tariffs that can reach as high as 50 percent, including a 25 percent tariff related to purchases of Russian crude, which is intensifying cost pressures. The report highlighted how uncertainty is negatively impacting trade flows and profit margins.

Despite a weaker US dollar, the Indian rupee has reached a record low, declining approximately 5 percent year-on-year, with the Reserve Bank of India (RBI) limiting interventions and unwinding forward positions to safeguard reserves while allowing depreciation to support exports, the report noted.

Furthermore, "Capital inflows are subdued, while the current account remains stable despite a decline in merchandise exports due to tariff pressures," it added.

India's GDP growth for Q1 reached an impressive 7.8 percent, and the government's initiative to simplify the GST framework is projected to inject around Rs 50,000 crore into the economy, thereby enhancing domestic consumption, according to the research arm.

SBI Capital Markets pointed out that fiscal pressures in the US and UK are complicating global trade dynamics, as increasing debt burdens lead to steeper bond yield curves.

"Simultaneously, weaker employment data in the US has raised the likelihood of a rate cut in the upcoming September policy review. In India, the yield curve remains steep as persistent borrowing by state governments continues to impact the long end," the research team observed.