Amid global economic headwinds—ranging from steep US tariffs to rising fiscal stress in developed economies—India’s growth trajectory remains notably resilient, according to a new report by SBI Capital Markets.
The report, ‘Tariffs are Made in the USA, but Resilience is Made in India’, underscores how domestic consumption and government spending are cushioning the Indian economy against external volatility.
The report points to the United States’ aggressive tariff regime as a major global flashpoint.
Indian exports have taken a significant hit from reciprocal US tariffs introduced in August, with duties reaching up to 50% in sectors like automobiles, agricultural products, and textiles.
An additional 25% levy linked to crude oil imports from Russia further complicates matters.
A recent US appeals court ruling deemed the tariffs unconstitutional, prompting the administration to escalate the matter to the Supreme Court.
“Until clarity emerges, trade-policy volatility remains elevated, particularly in autos, electronics, and textiles,” the report noted.
Exporters are already feeling the strain, with rising input costs and squeezed margins forcing many firms to reassess supply chains and pricing models.
Nevertheless, India’s economy continues to find strength in domestic drivers.
Domestic Growth Drivers
Despite the external headwinds, India began FY 2025–26 on a strong note. The economy expanded by 7.8% in the first quarter, bolstered by private consumption, steady capital expenditure, and renewed revenue spending by the government.
SBI Capital also cited the government’s decision to streamline the GST structure, which is expected to inject ₹50,000 crore into the economy, further fuelling consumption and offering a buffer against weaker exports.
The report also highlights the role of emerging global alliances in reshaping trade dynamics. Organisations like the Shanghai Cooperation Organisation (SCO) are gaining strategic importance.
At the 25th SCO Summit in Tianjin, Prime Minister Narendra Modi engaged in bilateral talks with Chinese President Xi Jinping and Russian President Vladimir Putin, signalling a recalibration of India’s foreign policy.
These shifts align with India’s broader aim to lead within the Global South while promoting its MAHASAGAR (Mutual and Holistic Advancement for Security and Growth Across Region) vision.
Meanwhile, investor sentiment remains cautious.
“Sustained FPI outflows reflect concerns over stretched valuations and tariff-driven trade risks,” the report said.
Indian equities have underperformed compared to other emerging markets, and the rupee has declined around 5% year-on-year.
Although the RBI has limited its currency market intervention, it continues to manage reserves carefully—allowing the rupee to depreciate in a controlled manner to support exports.
While risks persist—especially around trade and capital flows—India’s economic fundamentals appear strong.
“Collectively, these measures help cushion the economy against softer export prospects and external headwinds,” the report concluded.
SBI Capital maintains that India’s economic resilience, underpinned by strong domestic demand and evolving global partnerships, positions the country to weather the storm better than many of its peers.
Also Read: Indian Markets Open Higher On US-India Trade Optimism And Global Gains
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