India can withstand US tariff shock, economic fundamentals strong, says industry body PHD Chamber

Mint

06-08-2025

New Delhi: India's trade resilience remains strong despite the 25% tariff imposed by US President Donald Trump on Indian goods, with the country's broader export base and strong domestic fundamentals helping buffer the shock, industry body PHD Chamber of Commerce and Industry (PHDCCI) said.
A white paper released by the industry body estimates that while the tariff will affect around $8.1 billion worth of exports to the US, the overall impact on India's economy is expected to be limited, with a projected GDP hit of just 0.19%.
'Our analysis indicates that there will be an estimated impact of only 1.87% on India's total global merchandise exports and a negligible 0.19% on India's GDP,' said Hemant Jain, president of PHDCCI. He added that India continues to be the fastest-growing major economy in the world, with the IMF projecting 6.4% growth in 2025–26.
The tariff, which affects a wide range of Indian goods entering the US market, has drawn particular concern from sectors such as engineering goods, electronics, pharmaceuticals, gems and jewellery, and ready-made garments.
According to PHDCCI estimates, the engineering sector faces the largest exposure at $1.8 billion, followed by electronics at $1.4 billion, pharmaceuticals at $986 million, gems and jewellery at $932 million, and apparel at $500 million.
In response, the chamber has proposed a four-pronged strategy to mitigate the fallout. These include negotiating bundled pricing with major U.S. retailers like Walmart and Amazon, developing premium variants of export products, redirecting trade volumes to other markets such as the EU, Canada, and Latin America, and encouraging joint ventures for on-shore production in the U.S.
'The tariff challenge accelerates India's need for export sophistication and geographic diversification. Our strategy framework provides a roadmap for converting this disruption into an opportunity for long-term competitiveness enhancement,' said Jain.
Ranjeet Mehta, CEO and secretary general of PHDCCI, added that India's diversified economy and strong domestic demand offer a cushion against external shocks. 'While the 25% U.S. tariff presents challenges, our analysis shows the impact remains manageable at the macro level,' he said.
India exported $86.5 billion worth of goods to the U.S. in FY25, making it the country's largest export destination. With U.S. tariffs now affecting close to 10% of India's total exports to that market, the industry is closely watching whether further escalation will follow, particularly after Trump warned of doubling down on countries that continue to import Russian oil.
Despite the uncertainty, PHDCCI highlighted India's rising competitiveness in sectors like electronics, which recorded a 50.7% compound annual growth rate between FY2020 and FY2025. It also flagged strong performance in the agri-food sector, with double-digit export growth reflecting robust global demand.
Based on a price elasticity of –0.5 and a 25% tariff, India is estimated to lose about $8.1 billion in exports to the US across various sectors in FY2026. Within this, the export of fruits and vegetables, valued at $331.47 million, could see a potential loss of $31.08 million.
Meat, dairy, and poultry products, which together contributed $206.83 million in export value, are projected to face a loss of $19.39 million. Tea exports may decline by $8.71 million from their FY2025 level of $92.95 million, while jute manufacturing including floor coverings could see a $8.34 million hit on $88.97 million in exports.
Tobacco exports, worth $86.89 million, may incur a loss of $8.15 million, and coffee exports could be reduced by $7.68 million from a base of $81.89 million. Oil seeds and oil meals, with export values of $59.57 million and $17.33 million respectively, may suffer losses of $5.58 million and $1.62 million.
Cashew exports, at $7.81 million, could shrink by $0.73 million, while exports of other cereals are likely to dip by $0.46 million from a total of $4.96 million. The cumulative estimated loss across all affected commodities stands at $8.11 billion.
'The US' decision to impose a 25% tariff on select Indian exports appears largely symbolic — more than half of the $132 billion trade remains unaffected, and the estimated GDP impact is minimal at 0.2–0.4%. Crucially, dairy has been excluded from any duty cuts, reaffirming its strategic role in India's rural economy and long-term national self-reliance,' said Ravin Saluja, Director of Sterling Agro Industries Ltd. (Nova Dairy).