India's Economic Resilience in the Face of US Tariffs

NEW DELHI: As US President Donald Trump prepares to impose reciprocal tariffs, a recent analysis by Motilal Oswal reveals that India's economy is poised to withstand the potential upheaval with minimal disruption. Despite a significant tariff differential with the US, the impact on India's GDP is projected to be a mere 1.1%, thanks to the strategic composition of its exports.

Key Insights from the Report

The study underscores that India's exports to the US in the most vulnerable sectors total $42.2 billion, which accounts for just 1.1% of the nation's GDP. Industries such as electrical machinery, gems and jewellery, and pharmaceuticals are identified as the most susceptible to changes.

Understanding the India-US Trade Dynamics

In 2024, the bilateral trade between India and the US soared to $124 billion, with India enjoying a trade surplus of $37 billion. The report highlights that despite the tariff gap, India's trade deficit with the US is relatively low compared to other major trading partners, suggesting a lesser likelihood of aggressive targeting.

Sectors at Lower Risk

Certain sectors, including agriculture and dairy products, are expected to remain largely unaffected due to their minimal contribution to exports. Similarly, industries where India has a trade deficit with the US, such as energy commodities and autos, are considered less vulnerable to tariff increases.

Conclusion: India's Strategic Position

With a diversified export portfolio and a burgeoning trade surplus, India is well-equipped to navigate the challenges posed by US tariffs. The report concludes that India's economic foundation is robust enough to mitigate the potential impacts, setting it apart from other nations that may face more significant consequences.