Trump Tariffs To Have Limited Impact On India's Growth, FY26 Forecast At 6.5%: S&P
India's economy is unlikely to face a major slowdown despite higher US tariffs, S&P Global Ratings said on Wednesday, August 13, nearly a week after a 25 percent duty on Indian goods came into effect and American President Donald Trump announced an additional 25 percent levy linked to Russian oil imports.
'We don't think tariffs imposed on India would have much of an impact on economic growth," said YeeFarn Phua, director for sovereign and international public finance ratings, Asia, at S&P Global Ratings, according to a report by Moneycontrol. The agency expects India's GDP to grow 6.5 percent in FY26.
Phua told Moneycontrol that exemptions for electronics, especially smartphones and pharmaceuticals will cushion the impact, while India's export exposure to the US is modest at around 2 percent of GDP.
Analysts also point to the country's large domestic market as a continued draw for investors, even under higher tariff regimes.
India exported goods worth $86.5 billion to the US in FY25, with about 55 percent of this trade at risk from the new duties. The remainder falls under exemption or exclusion categories.
The initial 25 percent US tariff is on top of most-favoured nation rates, while the Russia-linked penalty, which doubles tariffs to 50 percent on imports from countries buying Russian oil, will be applicable from August 27, putting India among the most tariffed nations alongside Brazil.
An analysis by Moneycontrol estimated India's effective tariff rate at about 32 percent, more than double the Southeast Asian average. Their analysis highlighted that the government expects GDP growth to remain above 6 percent, aided by a favourable monsoon and stable crude oil prices.
'The positive outlook for India remains," Phua was quoted as saying. S&P sees the most pronounced tariff effects within one to two years but cautions that uncertainty could dampen investment sentiment for longer.
'Everyone would minimise their investment to relatively safe levels," said Kim Eng Tan, senior director for APAC sovereign ratings at S&P, while speaking to the outlet.
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August 13, 2025, 21:51 IST
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