S&P Global Ratings, in August 2025, released an in-depth analysis of the expected effect of recent tariffs imposed by the US on Indian imports, after President Donald Trump announced a retaliatory 50% duty- 25% implemented on August 7 and another 25% on August 27. The action was largely a reaction to New Delhi’s ongoing purchases of oil from Russia. Even as there are fears of economic fallout, S&P Global Ratings asserts that the steps would have only a marginal impact on India’s strong growth path and sovereign ratings.
Limited Exposure, Strong Fundamentals
India’s exports to the US make up approximately 2% of its GDP, highlighting the country’s relatively limited dependence on external trade. S&P points out that India’s economy is driven overwhelmingly by domestic consumption, accounting for nearly 60% of growth, rather than exports, positioning it to better withstand trade shocks compared to export-led countries.
Large Indian export industries exposed to tariffs, including consumer electronics and pharmaceuticals, have been mostly spared by the new levies. The rating agency pegs the share of GDP in exports that would be affected by higher tariffs at just 1.2%, further shielding the broader economy.
Also Read | MAGA or just Being a Good Friend? Republicans Question Tariffs’ Agenda
Positive Ratings Momentum Despite Tariffs
Contrary to market fears, S&P Global revised India’s long-term sovereign credit rating upwards from ‘BBB-‘ to ‘BBB’, the first such revision in 18 years. The action is a sign of faith in India’s sound economic fundamentals, persistent fiscal consolidation, and judicious monetary policy. S&P forecasts India’s GDP growth rate at 6.5% in FY2025, with projections to average 6.8% each year over the next three years, amongst the highest in the Asia-Pacific region.
The agency emphasized, “We believe the impact of US tariffs on the Indian economy will be manageable. Although the US is India’s largest trading partner, we do not anticipate the 50% tariffs, if imposed, to create a material drag on growth”.
Also Read | Inflation Data Suggests CPI Fell Below Estimates
Investment and Trade Flows Not Likely to Come Upshort
S&P’s analysis also points to Indian investment flows’ resilience. Several companies have pursued a “China + 1” approach, investing in India simply to serve its growing domestic market and not solely to export to the US. US-India bilateral trade continues to be important, hitting $186billion in 2024-25, but the general impact of increased tariffs will be limited.
Long-Term Outlook Remains Strong
Although the tariffs will produce a one-time shock to growth, S&P predicts India’s long-term prospects, driven by increasing middle-class consumption, ongoing public investment, and persistent economic reforms, are not jeopardized. The rating agency stresses that only meaningful fiscal slippage or structural deceleration in growth can imperil this positive outlook.
In short, against the backdrop of increased tariffs and related geopolitical tensions, S&P Global’s analysis is that India’s growth story will continue to be resilient with little dislocation from US tariff policy.
