The latest SBI Research report has stated that the impact of US reciprocal trade tariffs on India will be minimal, as India has successfully diversified its export portfolio and adopted new trade strategies. The report, released on Monday, highlights how India is exploring alternative markets, increasing value addition, and creating new supply chain routes from Europe to the US via the Middle East.
Limited Impact on Indian Exports
According to the report, India’s exports are expected to decline by only 3-3.5%, a drop that can be offset by higher export targets in both manufacturing and services sectors. The study suggests that India’s growing focus on export-oriented production and Free Trade Agreements (FTAs) will help maintain stability despite external trade pressures.
Opportunities in Aluminium and Steel Sectors
The report also notes that India could benefit from the aluminium and steel tariffs imposed by the US last week. While India currently has a trade deficit of $13 million in aluminium and $406 million in steel with the US, the new tariffs might create opportunities for Indian exporters to expand their market share.
US Tariffs and Bilateral Trade Talks
The US reciprocal tariffs are set to take effect on April 2, prompting ongoing bilateral discussions between India and the US. Union Commerce Minister Piyush Goyal recently held talks with US Trade Representative Jamieson Greer, discussing a mutually beneficial Bilateral Trade Agreement (BTA) between the two nations.
Goyal emphasized that India’s trade strategy will be guided by the principles of ‘India First’ and ‘Viksit Bharat’, as well as the Comprehensive Strategic Partnership with the US. The discussions follow earlier meetings between Goyal, Greer, and US Commerce Secretary Howard Lutnick, where they laid the groundwork for the first phase of a trade agreement by the fall of 2025.
India’s Expanding Free Trade Agreements (FTAs)
The SBI Research report also highlights India’s ongoing negotiations for Free Trade Agreements (FTAs) with key global partners, aimed at boosting export-driven domestic manufacturing.
- In the past five years, India has signed 13 FTAs with countries such as Mauritius, the UAE, and Australia.
- India is currently negotiating FTAs with the UK, Canada, and the European Union (EU), with a focus on services, digital trade, and sustainable development.
- India and New Zealand have also announced the launch of FTA negotiations for a comprehensive trade agreement.
The India-UK FTA alone is projected to increase bilateral trade by $15 billion by 2030, while future FTAs aim to enhance digital trade and boost India’s digital economy, which is estimated to contribute $1 trillion to India’s GDP by 2025.
Strategic Shift in India’s Trade Policy
The SBI report emphasizes that geopolitical changes and global trade tensions, including the US tariff war, are shaping India’s FTA strategy. The country is aligning its trade policies to ensure long-term economic resilience and competitiveness.
These FTAs cover a broad range of topics, including:
- Tariff reductions for manufacturing and agriculture
- Trade regulations for services and digital commerce
- Intellectual property rights affecting the pharmaceutical industry
- Investment promotion and protection mechanisms
As India continues to expand its trade partnerships and strengthen its export capabilities, experts believe that the country is well-positioned to navigate global trade disruptions and capitalize on new economic opportunities.
