New US Tariffs to Hurt India’s Exports! Will MPC Meeting Lead to Interest Rate Cuts?

(Fast Mail News):-- The new US tariffs could result in a loss to India’s exports, estimated at 0.3% to 0.4% of GDP. This is due to India’s economy being primarily focused on the domestic market and its relatively low share in goods exports to the US.

According to a CareEdge Ratings report, “Not only is India’s reliance on exports low, but its goods exports to the US account for approximately 2% of the country’s Gross Domestic Product (GDP), providing additional resilience.”

The report stated that India’s services exports will remain outside the scope of these tariffs, continuing to support the external sector.

The report estimates that the Current Account Deficit (CAD) will remain at 0.9% of GDP in Fiscal Year 2026.

Any diversification in India’s oil imports from Russia is expected to have minimal impact on the CAD, as the price differential between Russian Urals and benchmark Brent crude has narrowed from an average of $20 per barrel in 2023 to about $3 per barrel.

The report noted that the US accounts for 37% of India’s total electronic exports. Certain items in this sector have been temporarily exempted from the 25% US tariff. Additionally, India’s pharmaceutical exports to the US (which constitute 35% of India’s total pharma exports) are also excluded from the tariffs.

According to the report, compared to several Asian peers like Vietnam, Indonesia, and South Korea, India’s relative tariff advantage for exports to the US has effectively reversed after the 25% US tariffs, with the possibility of additional penalties linked to India’s trade relations with Russia.

However, India-US trade talks are expected to continue, which may provide some relief. Still, India will remain cautious about opening sensitive sectors like agriculture and dairy, indicating that the negotiations may take time to conclude.