S&P Global Ratings Director YeeFarn Phua said on Wednesday that Trump's tariffs will not influence India's economic growth because the country is not highly dependent on trade. Phua also mentioned that India's sovereign ratings outlook will continue to be positive.
In May last year, S&P had changed India's sovereign rating outlook to positive from 'BBB-', citing the country's robust economic growth.
On August 6, US President Donald Trump declared an extra 25 per cent tariff on all Indian imports, which, added to the already in-force 25 per cent duty, will make up 50 per cent beginning August 27. The White House said the action comes in light of India's ongoing purchase of Russian oil.
Replying to a query on whether the tariff imposition poses downside risks to the positive outlook on India, YeeFarn said, "I don't think the tariffs imposed on India will have an impact in terms of economic growth, largely because India is not a very trade-oriented economy. And if you look at India's exposure to the US in terms of exports to GDP, it is just about 2 per cent".
S&P also estimates India's GDP to rise by 6.5 per cent in the ongoing fiscal year, matching what was achieved last year.
YeeFarn Phua also noted that major industries like pharmaceuticals and consumer electronics that sell to the US are not impacted by the tariffs.
"Over the longer term, we don't think this (higher tariffs) will be a big hit (on India's economy), and therefore, the positive outlook on India remains," YeeFarn said at a Webinar on Asia-Pacific Sovereign Ratings.
When queried whether US tariffs would influence investment flows into India, YeeFarn Phua said the 'China plus one' strategy has been the approach in recent years, with firms setting up operations in India mainly to cater to the local market.
"Many (businesses) are going there not because they are looking to export just to the US. Many of them are going there because of the huge domestic market as well. An emerging middle class is getting larger...So, even for those who are looking to invest more in India and looking to export, it might not necessarily be the US market," YeeFarn said.
Between 2021 and 2025, the US became India's largest trading partner. The US supplied about 18 per cent of India's total exports of goods, 6.22 per cent of its imports, and 10.73 per cent of total bilateral trade.
India had a trade surplus with the US in goods, at USD 35.32 billion in 2023-24, and this increased to USD 41 billion in 2024-25.
In 2024-25, the two nations' bilateral trade stood at USD 186 billion, with India exporting commodities worth USD 86.5 billion and importing USD 45.3 billion worth of goods.
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