India’s Export Growth Can Withstand Additional 10 % US Tariff: SBI Research

New Delhi, July 15 (KNN) As India and the United States move closer to finalising a long-anticipated trade agreement, a new report by SBI Research suggests that India’s export outlook remains resilient—even if the deal falls short or includes tariff disadvantages.

Titled ‘Tariff Truce on the Horizon: India, USA Set to Seal the Trade Deal’, the report acknowledges that US President Donald Trump’s renewed push for ‘reciprocal trade’ could see BRICS nations, including India, subjected to 10 percent tariffs. 

Yet, it argues that India is well-positioned to navigate such challenges and expand its global export footprint across key sectors.

“We believe that even if the India-US deal doesn’t come up as desired and 10 percent additional tariffs are imposed on India, there are various avenues for India to diversify its exports,” the report states.

SBI Research points to the ongoing reshaping of global trade dynamics following the US’s recent tariff hikes on 23 countries. 

India, comparatively less affected by the new measures, stands to gain market share in sectors such as chemicals, apparel, processed foods, and agricultural goods—both in the US and in Asian markets impacted by the tariffs.

India has a revealed comparative advantage in chemicals and pharmaceuticals—segments where China and Singapore currently dominate US imports. 

The report estimates that if India captures just 2 percent of the US chemical import share currently held by China and Singapore, it could contribute 0.2 percent to India’s GDP. 

A further 1 percent shift from countries such as Japan, South Korea, and Malaysia could yield an additional 0.1 percent.

The report recommends that India negotiate for tariff rates below 25 percent, closer to those granted to countries like Singapore, to enhance competitiveness in price-sensitive sectors.

In textiles, India already accounts for around 6 percent of US apparel imports. With new US tariffs hitting Bangladesh, Cambodia, and Indonesia, India could boost its share by an additional 5 percent, potentially adding 0.1 percent to GDP. 

The report further flags India’s widening trade deficit with ASEAN countries, which surged to USD 45 billion in FY25 from USD 16 billion in FY21. 

It attributes this partly to ‘weak rules of origin’ in the ASEAN-India Free Trade Agreement (AIFTA), which have allowed Chinese goods to enter India via ASEAN members. 

It recommends tightening trade rules and addressing tariff distortions to curb indirect imports.

“India has the resilience and sectoral strength to diversify its export base. With appropriate trade and industrial policy support, it can convert global tariff shocks into a strategic advantage,” it concludes.

(KNN Bureau)