India’s economic growth trajectory is unlikely to face significant headwinds from the recently announced US tariff measures, according to a fresh assessment by S&P Global Ratings. The agency believes that the country’s strong domestic consumption, robust services exports, and diversified trade portfolio will help cushion any adverse effects from the American trade policy changes.
Tariffs in Context – The US Trade Move
The United States government recently announced a new set of tariffs targeting certain imported goods, aimed at protecting domestic industries and reducing trade deficits. While some emerging economies might feel the heat due to their reliance on US-bound exports, India’s exposure to the affected product categories is relatively minimal.
S&P’s Assessment – Why India Is Resilient
S&P Global Ratings’ latest note highlights several factors behind its optimistic stance:
- Low Share of Exports in GDP
India’s economy is driven largely by domestic consumption and investment, with exports contributing around 21% of GDP. This means that even if a fraction of exports face tariffs, the overall impact on growth will be limited. - Diversified Export Basket
Indian exports include services, IT solutions, pharmaceuticals, and agricultural products. Many of these sectors remain unaffected by the new US tariffs. - Strong Services Sector
The IT and business services sector, which forms a large share of India’s US exports, operates under long-term contracts that are unlikely to be impacted by tariff changes. - Resilient Domestic Economy
With robust private consumption, a rising middle class, and growing infrastructure investments, India’s growth story is not solely dependent on external demand.
India–US Trade Snapshot
| Category | FY24 Export Value to US (USD Billion) | Share in Total Exports (%) | Tariff Impact Risk |
|---|---|---|---|
| IT & Business Services | 85 | 43 | Low |
| Pharmaceuticals | 7.2 | 3.6 | Very Low |
| Textiles & Apparel | 10.5 | 5.3 | Moderate |
| Gems & Jewellery | 11.0 | 5.6 | Low |
| Engineering Goods | 16.8 | 8.5 | Moderate |
The table reflects that sectors at moderate risk, like textiles and engineering goods, account for a small share of GDP, hence the muted overall effect.
Historical Perspective – Lessons from Past Trade Disruptions
India has faced similar challenges in the past, such as the US withdrawal of GSP (Generalized System of Preferences) benefits in 2019. Yet, GDP growth remained largely unaffected due to swift market diversification and the resilience of domestic demand.
Comparative Impact on Other Economies
| Country | Export Dependency on US (%) | Tariff Sensitivity | Expected GDP Impact (%) |
|---|---|---|---|
| India | 17 | Low | <0.1 |
| Vietnam | 28 | High | 0.4–0.6 |
| Mexico | 77 | Very High | 0.8–1.2 |
| Philippines | 15 | Moderate | 0.2–0.3 |
India’s relatively low dependency on US-bound exports is a key reason for the limited projected impact.
Expert Opinions
- Radhika Mehta, Trade Economist: “India’s services-led export profile shields it from heavy tariff shocks, unlike manufacturing-heavy economies.”
- Anirban Chatterjee, Global Markets Analyst: “Any short-term hit in certain goods exports will likely be offset by growing demand in alternative markets like the EU, Middle East, and ASEAN.”
Policy Support Measures – How India Could Further Minimize Impact
The Indian government is already exploring steps to safeguard exporters, including:
- Expanding trade partnerships with ASEAN, EU, and African nations.
- Offering targeted incentives to textile and engineering exporters facing tariff exposure.
- Encouraging value addition and product diversification to boost global competitiveness.
Growth Outlook – S&P’s Forecast
S&P maintains its India GDP growth forecast at 6.8% for FY25, with the following key assumptions:
- Strong infrastructure spending by the government.
- Stable monetary policy with possible rate cuts in late FY25.
- Continued FDI inflows into manufacturing and renewable energy sectors.
Broader Economic Context
Even as global trade faces uncertainties due to geopolitical tensions, shifting supply chains, and protectionist measures, India’s growth foundation remains anchored in:
- Urban demand recovery post-pandemic.
- Expanding digital economy and e-commerce penetration.
- Accelerated adoption of green energy and EV manufacturing.
Final Takeaway
The S&P Global Ratings report sends a reassuring signal to investors and policymakers: US tariffs will not derail India’s growth path. While some exporters may face challenges, the country’s diversified economic structure and strong domestic base provide a natural cushion.
Disclaimer: This article is for informational purposes only and is based on publicly available economic data and expert commentary. It does not constitute investment or trade advice. Readers should consult financial professionals before making any decisions.
