Despite US President Donald Trump imposing hefty tariffs on imports from India due to its oil purchases from Russia, S&P Global Ratings has clarified that this decision will not adversely affect India’s economic growth. The agency also stated that the tariffs will not impact India’s sovereign rating, which maintains a ‘positive’ outlook.
In a webinar on Asia-Pacific sovereign ratings, YeeFarn Phua, Director at S&P Global Ratings, explained that India’s economy is not heavily reliant on trade. As a result, the impact of these tariffs will be minimal. He noted that India’s exports to the US account for only 2% of the country’s GDP. Additionally, key sectors such as pharmaceuticals and consumer electronics are exempt from these tariffs.
“Even in the long term, we believe this decision will not significantly affect India’s economy. Therefore, our ‘positive’ outlook on India remains unchanged,” Phua said. In May last year, S&P upgraded India’s sovereign rating outlook from ‘BBB-’ to ‘positive.’
On August 6, President Trump announced an additional 25% tariff on Indian imports, bringing the total to 50% when combined with the existing 25% tariff. These new tariffs are set to take effect on August 27. Meanwhile, S&P estimates that India’s GDP growth rate for the current fiscal year will remain steady at 6.5%, consistent with the previous year. The agency also highlighted that, under the ‘China Plus One’ strategy, many international companies are setting up operations in India, primarily targeting the country’s vast domestic market rather than exports to the US.
The United States remains India’s largest trading partner. In the 2024-25 fiscal year, bilateral trade between the two nations reached $186 billion. India’s exports to the US were valued at $86.5 billion, while imports stood at $45.3 billion.
US Tariffs on Indian Imports: FAQs
1. Why did the US impose tariffs on Indian imports?
The US imposed tariffs due to India’s oil purchases from Russia, as announced by President Donald Trump on August 6.
2. Will the new tariffs affect India’s economic growth?
According to S&P Global Ratings, the tariffs will have a minimal impact on India’s economy, as it is not heavily dependent on trade.
3. Which sectors are exempt from the US tariffs?
Key sectors like pharmaceuticals and consumer electronics are exempt from the tariffs.
4. What is India’s current sovereign rating outlook?
S&P Global Ratings has maintained a ‘positive’ outlook for India’s sovereign rating, upgraded from ‘BBB-’ in May last year.
5. When will the new tariffs take effect?
The additional 25% tariffs on Indian imports will take effect on August 27.
US Tariffs on Indian Imports: Disclaimer
This article is intended for informational purposes only and does not constitute financial or economic advice. Readers are encouraged to verify details with official sources.
For more information on S&P Global Ratings’ analysis, visit S&P Global Ratings.