India’s growth trajectory is set to remain robust despite a sharp escalation in US trade tariffs, according to S&P Global Ratings, a view likely to reassure equity, fixed income, and foreign direct investors eyeing the South Asian economy.
The US last week raised tariffs on Indian goods by 25%, with an additional 25% penalty on imports linked to Russian oil scheduled to take effect on August 27. The move elevates India’s effective US tariff rate to roughly 32%, placing it among the most heavily taxed exporters to America, alongside Brazil.
Yet, the macroeconomic hit is expected to be contained. Exemptions for high-value categories such as electronics (notably smartphones) and pharmaceuticals will protect some of India’s largest export earners. More importantly, exports to the US account for only about 2% of India’s GDP, limiting the systemic risk from tariff hikes.
S&P maintains its FY26 GDP growth projection at 6.5%, citing strong domestic consumption, a favourable monsoon outlook, and relatively stable crude oil prices. For investors, this underpins expectations of healthy corporate earnings growth, especially in domestically driven sectors such as financial services, consumer goods, and infrastructure.
However, the ratings agency cautions that the indirect effects, particularly on investor sentiment, could last longer than the immediate trade impact. Tariff uncertainty may encourage companies to adopt more conservative capex strategies, potentially delaying large-scale projects until geopolitical and trade dynamics stabilise.
For portfolio managers and corporate strategists, India’s large internal market, accelerating infrastructure build-out, and ongoing supply chain diversification still position it as a compelling long-term growth story, even amid elevated trade frictions.
