Trump Tariffs Expected to Have Minimal Effect on India’s FY26 Growth; S&P Projects 6.5% GDP Rise
India’s economic momentum is set to remain steady despite heightened US tariffs, according to S&P Global Ratings. On Wednesday, August 13, the agency said it anticipates India’s GDP will expand by 6.5% in FY26, even after a recent 25% duty on Indian goods and an additional 25% levy tied to Russian oil imports announced by US President Donald Trump.
“We believe the tariffs on India will not significantly hinder growth,” said YeeFarn Phua, Director for Sovereign and International Public Finance Ratings in Asia at S&P, as reported by Moneycontrol. He noted that exemptions for electronics—especially smartphones—and pharmaceuticals, coupled with India’s relatively small export exposure to the US (around 2% of GDP), would soften the blow.
Analysts highlighted that India’s vast domestic consumer base remains attractive to investors despite the higher trade barriers. In FY25, India exported goods worth $86.5 billion to the US, with roughly 55% of that potentially affected by the new duties. The rest falls under exemptions or special exclusions.
The first 25% US tariff is applied in addition to most-favoured-nation rates, while the Russia-related measure—doubling duties to 50% for imports from countries purchasing Russian oil—takes effect on August 27. This positions India alongside Brazil as one of the most heavily tariffed nations.
Moneycontrol’s analysis estimates India’s effective tariff rate at about 32%, more than twice the Southeast Asian average. Even so, government forecasts indicate growth will stay above 6%, supported by a favourable monsoon and stable crude oil prices.
“The outlook for India remains optimistic,” Phua stated. While S&P expects the clearest tariff impact within the next one to two years, it warns that uncertainty could weigh on investment appetite over a longer horizon.
“Most businesses would scale back investments to relatively cautious levels,” added Kim Eng Tan, Senior Director for APAC Sovereign Ratings at S&P.
