NEW DELHI: The finance ministry on Wednesday cautioned that while the immediate impact of US tariffs on Indian exports may be limited, their secondary and long-term effects could pose significant challenges.
The remarks come as Washington’s 50% duties on Indian goods took effect from August 27, covering exports worth over $48 billion.
The ministry’s monthly economic review stressed that ongoing India-US trade negotiations will be crucial in mitigating the fallout.
"While the immediate impact of recent US tariffs on Indian exports may appear limited, their secondary and tertiary effects on the economy pose challenges that must be addressed. In this context, the ongoing India-US trade negotiations will be crucial," it said.
Key sectors facing the brunt include textiles, gems and jewellery, shrimp, leather, chemicals, and machinery, though pharmaceuticals and energy products remain unaffected.
India is simultaneously pushing for diversified trade partnerships, with recent FTAs signed with the UK and EFTA, and negotiations under way with the US, EU, New Zealand, Chile, and Peru.
However, the report noted that these initiatives will take time and may not fully offset export losses if tariffs remain.
"This includes the recently concluded FTA with the UK and EFTA and ongoing FTA negotiations with the US, EU, New Zealand, Chile, and Peru. But, these initiatives will take time to show results and may not fully address the shortfall in exports to the US that may arise if the current tariff rates on India persist," it said.
The review also highlighted India’s upgraded sovereign rating by S&P from 'BBB-' to 'BBB', reflecting strong growth, stable policies, and high infrastructure investment. Domestically, better monsoon rains and improved crop prospects are expected to keep inflation moderate in the near term.
"An increased market arrival in Q1, comfortable buffer stocks and better output prospects, coupled with stable global oil markets, might keep the prices of food grain moderate. The downside risks to global growth are likely to keep international commodity prices in check, partly offsetting the impact of higher tariffs," it noted.
To further enhance the economic growth Prime Minister has announced a few initiatives focusing on policy reforms.
The government announced a Task Force for Next-Generation Reforms, a planned rollout of GST changes to ease the tax burden, and schemes like PM Viksit Bharat Rozgar Yojana to boost jobs and skill development.
Together, these measures aim to strengthen growth, attract investment, and sustain economic resilience amid global uncertainties.
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