New Delhi: Trump tariffs will not have any impact on India’s growth, as it is not a trade-oriented economy, and its sovereign ratings outlook will continue to remain positive, S&P Global Ratings Director YeeFarn Phua said Wednesday.
In May last year, S&P had upgraded the outlook on India’s sovereign rating of ‘BBB-‘ to positive, citing robust economic growth.
On August 6, US President Donald Trump announced an additional 25 per cent tariff on all Indian imports, on top of an existing 25 per cent duty, taking the total to 50 per cent from August 27.
The White House said the measure responds to India’s continued purchase of Russian oil.
Replying to a query on whether the tariff imposition poses downside risks to the positive outlook on India, YeeFarn said, “I don’t think the tariffs imposed on India will have an impact in terms of economic growth, largely because India is not a very trade-oriented economy. And if you look at India’s exposure to the US in terms of exports to GDP, it is just about 2 per cent”.
S&P estimates India’s GDP growth in the current fiscal year at 6.5 per cent, the same as it was in the previous financial year.
YeeFarn further said major sectors, like pharmaceuticals and consumer electronics, which export to the US, are exempted from tariffs.
“Over the longer term, we don’t think this (higher tariffs) will be a big hit (on India’s economy), and therefore, the positive outlook on India remains,” YeeFarn said at a Webinar on Asia-Pacific Sovereign Ratings.
To a query on whether US tariffs would impact investment flows into India, he said the ‘China plus one’ strategy has played out for businesses over the last few years, and companies are setting up businesses in India mainly to cater to domestic demand.
“Many (businesses) are going there not because they are looking to export just to the US. Many of them are going there because of the huge domestic market as well. An emerging middle class is getting larger…So, even for those who are looking to invest more in India and looking to export, it might not necessarily be the US market,” YeeFarn said.
In 2021-25, the US was India’s largest trading partner. The US accounts for about 18 per cent of India’s total goods exports, 6.22 per cent in imports, and 10.73 per cent in bilateral trade.
With America, India had a trade surplus (the difference between imports and exports) of USD 35.32 billion in goods in 2023-24. It was USD 41 billion in 2024-25.
In 2024-25, bilateral trade between India and the US reached USD 186 billion. India exported goods worth USD 86.5 billion while imports stood at USD 45.3 billion.
PTI