India's Exports Resilient to US Tariff Hikes: SBI

New Delhi, Feb 17 (KNN) A recent analysis by the State Bank of India suggests that the potential impact of U.S. tariff reciprocity on Indian exports will likely be limited, despite growing concerns about trade restrictions between the two nations. 

According to the report, even if the United States implements higher tariffs in the range of 15 to 20 percent, the overall decline in Indian exports to the U.S. is projected to be relatively modest, estimated at approximately 3 to 3.5 percent.

The report specifically notes that "overall incremental tariff levels even at 15-20 percent imposed by the US would still limit the impact on exports to US only in the range of 3-3.5 percent which again should be negated through higher export goals." 

Experts cited in the analysis believe that India can effectively offset this impact through strategic export diversification, increased value addition in its products, and exploration of alternative trade routes.

The United States continues to be India's most significant export destination, accounting for 17.7 percent of India's total exports during the 2023-24 financial year. 

However, India has been progressively diversifying its export strategy to reduce dependence on any single market. 

The country has been actively cultivating trade relationships with partners in Europe, the Middle East, and other regions, while simultaneously strengthening its supply chain networks to ensure greater stability in export performance.

The report provides historical context by highlighting the evolution of tariff policies between the two countries. U.S. tariff rates on Indian goods increased from 2.72 percent in 2018 to 3.91 percent in 2021, before decreasing slightly to 3.83 percent in 2022. 

In contrast, India's tariffs on U.S. imports have risen more substantially during the same period, growing from 11.59 percent in 2018 to 15.30 percent in 2022. 

This divergence in tariff structures reflects India's increasingly assertive trade policy, which aims to balance trade relations while protecting domestic industries from external competition.

India's strategy for mitigating potential tariff impacts includes a focused effort to enhance the value of its exports by shifting from raw materials to finished goods and high-value products. 

This approach not only improves export earnings but also helps Indian goods maintain competitiveness in global markets despite potential tariff increases. 

The value-added approach is a key component of India's broader trade strategy to build resilience against external trade barriers.

Additionally, the report mentions that India is actively developing alternative trade routes connecting Europe, the Middle East, and the United States. 

These initiatives are designed to reduce logistical costs and improve efficiency in international trade. 

The restructured supply chain approach is expected to strengthen India's position in global trade networks, helping the country navigate through periods of trade uncertainty and policy shifts.

(KNN Bureau)