Impact of US Tariffs on India Minimal as Nation Expands Export Base: SBI Report
A new SBI Research study says that the effect of US retaliatory tariffs on India will be limited as India has managed to diversify its export basket, add value, and identify alternative trade routes. India's attempts to reconfigure supply chains, from Europe to the US through the Middle East, and utilize emerging trade opportunities are emphasized in the report.
As per the report, India's loss of exports as a result of US tariffs has been estimated to be in the range of 3-3.5 percent. This reduction, however, is likely to be countered by a wider push in exports across manufacturing and services. India will also gain from the US-imposed tariffs on steel and aluminium, as it is currently in a trade deficit in these items with the US $13 million for aluminium and $406 million for steel providing room for possible gains.
The US retaliatory tariffs will come into effect from April 2, with continuous bilateral talks between Washington and New Delhi. Union Commerce Minister Piyush Goyal recently held discussions with US Trade Representative Jamieson Greer on a mutually advantageous Bilateral Trade Agreement (BTA). He reiterated India's adherence to the principles of "India First" and "Viksit Bharat" while deepening the Comprehensive Strategic Partnership with the US.
Goyal has also met US Commerce Secretary Howard Lutnick, after previous discussions between Prime Minister Narendra Modi and US President Donald Trump on finalizing an initial phase of a larger multi-sector BTA by late 2025.
The SBI Research report highlights India's aggressive pursuit of Free Trade Agreements (FTAs) with various global counterparts to promote export-led domestic production. In the past five years, India has inked 13 FTAs with nations such as Mauritius, the UAE, and Australia. It is in talks on trade agreements with the UK, Canada, and the EU with a focus on priority sectors such as services, digital trade, and sustainability.
The just-announced India-New Zealand FTA talks also reflect India's growing trade ambitions. The bilateral trade with the UK alone has the potential to grow by $15 billion by 2030, while FTAs in the future will have a greater emphasis on digital trade, which is expected to contribute $1 trillion to India's GDP by 2025.
Regional supply chains and changing geopolitical contexts, including US tariff policies, are influencing India's FTA strategy to fall in line with international trade patterns," the report added.
These FTAs cover several areas, ranging from tariff cuts favoring manufacturing and agriculture, services trade regulation, digital policies like data localization, intellectual property rights impacting pharma, and investment facilitation. With India forging strategic trade partnerships, it seeks to improve its resilience against economic disruptions in the world while strengthening its position in global markets.
