US rates cloud prospects for Indian exports, causing concerns about growth | Mint

New -Delhi: The introduction of a 25% tariff on Indian exports of 25% has shed a shadow over bilateral trade from 1 August, creating fresh uncertainty for exporters. In addition, uncertainty about a possible fine, linked to oil and defense purchases from Russia, can win prize strategies and disrupt the planning of the supply chain, making it more difficult to estimate the cost of the country. It would weigh in the short-term sentiment in the short term, analysts said. “Without clarity on the quantity of the fine, Indian exporters and US importers have no fixed basis to calculate country costs or determine how the tariff burden can be incorporated,” said Ajay Sahai, director -general and CEO (CEO) at the Federation of Indian Export Organizations (FIEO). “This ambiguity disrupts the planning of the supply chain and pricing,” he added. Trump strikes President Donald Trump, in a post on his truth, on Wednesday, announced on Wednesday that Indian exports to the US will face a 25% tariff from August 1, along with extra fine for buying oil and military equipment from the US sanctioned Russia. However, he did not expand the additional rates. Trump, referring to high Indian rates, ‘ominous’ non-monetary trade barriers, and the ongoing defense and energy ties of New Delhi with Russia, said the step was needed to address America’s ‘massive trade deficiency’ with India. “While India is our friend, we did … relatively few things with them,” he added. The US is not only India’s largest trading partner, but also one of the few major economies with which India enjoys a significant trade surplus. India’s Surplus for Goods Trade with the US rose to $ 41.18 billion in the financial year 2025 (FY25), by 16.6% higher than $ 35.33 billion a year ago. The increase was powered by an 11.6% increase in exports to $ 86.51 billion, while US imports grew by 7.4% to $ 45.33 billion. In comparison, India’s total goods trade reported a $ 282.8 billion deficit in FY25. Setback to export; Trade agreement remains the most important that some economists have marked the development as a setback for India, pointing out that competitive economies in Southeast Asia are experiencing lower duties, despite working in similar segments such as labor-intensive goods and electronics. According to Trump’s new tariff regime, Vietnam was initially hit by a 46% duty due to its larger trade surplus with the US, but Trump later made clear that most Vietnamese export rates would have below 20%, while the goods of the third countries would attract a 40% levy. Indonesia’s proposed 32% tariff was cut to 19% by mid -July, and the 20% tax of the Philippines was relieved in the same way to about 19% amid early bilateral talks. “The 25% tariff rate is definitely a negative development as it is compared to lower rates for peers such as Vietnam, Indonesia and the Philippines, which compete with India in a similar category of labor-intensive products and electronic goods,” said Garima Kapoor, Eleara Capital economist and executive vice president. Kapoor noted that although the exact tariff structure on exempt items such as pharmaceutical products and sectors with differential rates – such as iron, steel and cars – would be an important setback for India, as more than 30% of its pharmaceutical exports go to the US. But even in the midst of turmoil, with talks about a bilateral trade agreement (BTA) getting traction, the tariff storage can be temporary. “A well-negotiated agreement that addresses all aspects of trade, investment and tariff and non-tariff barriers by September Economic growth affected Madan Sabnavis, chief economist at Bank of Baroda, said a 25%tariff, except the punishment component, did not differ much from April levels, when the rates were announced for the first time by Trump, but still the Indian exporters will put pressure. “At this stage, some depreciation may be appropriate to support exports. Overall growth can be affected, and our forecast of 6.4%-6.6%even holds even with the most negative impact on 6.4%,” he added. The Indian GDP growth for FY26 is expected to remain strong, with the Reserve Bank of India (RBI) predicting 6.5%, slightly lower than earlier estimates due to global trade risks. The Ministry of Finance expects growth at 6.3%-6.8%, supported by structural reforms and stable macro fundamentals. The International Monetary Fund (IMF) recently increased its forecast to 6.4%, referring to the relief of trade tension and resilient domestic demand. While the outlook remains optimistic, these institutions marked external risks as important disadvantages. Some agencies have downgraded India’s economic growth for FY26 to rising external challenges. The Rating Agency ICRA Ltd downgraded India’s growth forecast for FY26 to 6.2% from 6.5% last month based on external factors affecting the country’s growth. Agency’s chief economist Aditi Nayar said the tariff and penalty imposed by the US on Wednesday are higher than expected and are likely to have further winds in India’s GDP growth. “The extent of the disadvantage will depend on the size of the fines imposed,” she added.