NEW DELHI— The steep U.S. tariff hike on Indian goods announced by President Donald Trump will have minimal impact on India’s economic momentum and will not alter its favorable sovereign credit outlook, S&P Global Ratings said Wednesday.
In May 2024, S&P upgraded the outlook on India’s ‘BBB-’ sovereign rating from stable to positive, citing the economy’s strong and sustained growth trajectory. On August 6, the White House imposed an additional 25% tariff on all Indian imports — on top of an existing 25% duty — lifting the total levy to 50% effective August 27. The Biden administration said the measure responds to India’s continued purchases of Russian oil.
At an Asia-Pacific Sovereign Ratings webinar, S&P Global Ratings Director YeeFarn Phua said the impact will be limited because India is not a trade-dependent economy. U.S.-bound exports account for roughly 2% of India’s GDP, and key sectors such as pharmaceuticals and consumer electronics are exempt from the new duties.
“Over the longer term, we don’t think this will be a big hit on India’s economy, and therefore, the positive outlook on India remains,” Phua said. S&P projects India’s GDP to expand 6.5% in the current fiscal year, matching last year’s pace.
Phua also highlighted that many multinational corporations are establishing operations in India under the “China plus one” strategy, largely to serve its vast domestic market rather than relying on U.S. export demand. India’s growing middle class, he said, continues to be a magnet for foreign investment.
The U.S. remains India’s largest trading partner. In FY 2024–25, bilateral trade reached $186 billion, with India exporting $86.5 billion in goods to the U.S. and importing $45.3 billion, leaving New Delhi with a $41 billion trade surplus. (Source: IANS)
