Analysts Say US Tariffs Will Have Limited Effect On India’s Growth

As the United States prepares to impose secondary tariffs of 25 per cent on imports linked to Russian oil from August 27, analysts argue that the resulting 50 per cent duty is unlikely to derail India’s growth trajectory.

Strong domestic demand and sectoral resilience are expected to offset the impact.

Reports suggest that while labour-intensive sectors such as textiles and gems, and jewellery could face moderate pressure, industries including pharmaceuticals, smartphones and steel remain relatively shielded due to exemptions, existing tariff structures and robust local demand.

S&P Global Ratings said that the scale of India’s domestic market will cushion the macroeconomic fallout.

Exports of capital goods, chemicals, automobiles and food and beverages will face the sharpest adjustments.

Textiles remain particularly sensitive, given that the United States is India’s largest export destination for the sector.

India, now the third-largest supplier to the US after China and Vietnam, holds a 9 per cent share of the American market.

Over the past five years, India’s share has risen from 6 per cent, while China’s has fallen significantly from 38 per cent to 25 per cent.

Resilience Underlined by Analysts

Market observers highlight that sectors driven primarily by domestic consumption, such as financial services, telecom, aviation, hotels, cement and segments of capital goods, are in a stronger position to withstand external headwinds.

A Morgan Stanley report described India as the ‘best placed country in Asia’ amid global trade tensions, citing its relatively low goods exports-to-GDP ratio. The report stated that, while India faces direct tariff risks, it remains less vulnerable to a global goods trade slowdown.

Fitch Ratings echoed this sentiment, noting that the scale of India’s domestic market reduces its reliance on external demand. It forecast that the economy would maintain growth of 6.5 per cent in FY26 despite tariff pressures.

With robust internal consumption and diversified trade linkages, analysts believe India can weather the impact of the new tariff regime, even as exporters in certain sectors adjust to more challenging conditions.

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