NEW DELHI— As the U.S. prepares to impose a second round of 25 percent tariffs on Indian goods this week, taking the total duty burden to 50 percent, analysts say the broader impact on India’s economy will be limited thanks to resilient domestic demand and a large internal market.
S&P Global Ratings said the macroeconomic fallout would be cushioned by India’s sizeable domestic base, even as some export-oriented sectors adjust to the new trade headwinds. Labour-intensive segments such as textiles and gems and jewellery are expected to feel the strain, while pharmaceuticals, smartphones and steel remain relatively insulated because of exemptions, existing tariff structures and strong local demand.
Sectors facing the steepest challenges include capital goods, chemicals, automobiles, and food and beverage exports, according to the ratings agency.
The U.S. is India’s top export market for textiles, and India has steadily gained share over the past five years, rising from 6 percent to 9 percent of U.S. imports as China’s share slipped from 38 percent to 25 percent. That reliance, analysts say, makes Washington’s latest move a potential setback for India’s exporters, though established supply-chain linkages could act as a stabiliser.
Market watchers note that domestic-facing sectors such as financial services, telecom, aviation, hospitality, cement, and parts of capital goods are positioned to withstand global shocks.
Morgan Stanley described India as the “best placed country in Asia” amid trade uncertainty, citing its relatively low goods exports-to-GDP ratio. “While India is exposed to direct tariff risks, we believe on balance India is less exposed to global goods trade slowdown considering that it has the lowest goods exports to GDP ratio in the region,” the bank said in a recent note.
Fitch Ratings echoed that view, projecting India’s economy will grow at 6.5 percent in FY26 despite tariff escalation. “The large size of India’s domestic market, which reduces reliance on external demand, is expected to insulate the country from the U.S. tariff hike,” Fitch said.
The secondary tariff round, set to take effect on August 27, follows Washington’s move earlier this month to impose a 25 percent duty on Indian imports in retaliation for New Delhi’s continued purchase of Russian crude oil. (Source: IANS)
