India Has Resilience Against US Tariffs: Tata Mutual Fund
US President Donald Trump with PM Narendra Modi Image credit MEA
Tata Mutual Fund Report Highlights Strategic Strengths
By S Jha
New Delhi, April 3: Despite concerns over the 26% reciprocal tariff imposed by the United States, India is expected to withstand the impact better than many of its Asian and emerging market peers, according to a recent report by Tata Mutual Fund.
The report highlights India’s low export dependency on the US, diversified trade base, and strategic policy measures as key buffers against the tariff shock.
India’s Limited Exposure to US Market
The report said that “unlike nations heavily reliant on the US for exports, India sends only 18% of its total exports to the US, contributing merely 2.2% to India’s GDP”. It added that major competitors face higher tariffs and deeper reliance on US trade such as China – 54% tariff, Vietnam – 46% tariff, and Mexico – 38% tariff.
The report further stated that “India’s major export sectors, such as IT services and pharmaceuticals, remain largely tariff-free, further shielding the country from trade disruptions”.
Strategic Responses to US Tariffs
The report stated that “India has taken proactive steps to diversify its trade portfolio and reduce exposure to US-dependent sectors”:
- Trade Diversification
- Exports to the EU surged 30% in 2024, reducing reliance on the US market.
- Strengthened trade relations with Africa and the Middle East, opening up new avenues for Indian goods.
- Active Free Trade Agreements (FTAs)
- The India-UK FTA (near finalization) is projected to increase bilateral trade by $15 billion by 2030.
- The UAE-India FTA has already boosted trade volumes by 35% in FY24.
- Ongoing trade talks with the EU, Oman, New Zealand, and ASEAN signal a strategic pivot towards non-US markets.
- Shift to High-Value Manufacturing
- India is ramping up electronics, renewable energy, and semiconductor production—key industries that are either exempt from tariffs or benefit from global supply chain shifts.
- Apple now manufactures 14% of iPhones in India, showcasing growing global confidence in Indian manufacturing.
- Policy Recalibration
- India is reportedly reviewing tariff structures in gems & jewellery, electronics, and machinery to make trade terms more competitive.
- By lowering domestic tariffs, India could reduce the reciprocal tariff burden under the Trump doctrine and create a more favorable trade environment.
India’s Competitive Edge in a Changing Trade Landscape
Despite the 26% tariff challenge, the broader impact on India’s economy remains minimal, with only 2.2% of GDP at risk, added the report. The Tata Mutual Fund report suggests that India may, in fact, emerge stronger in the recalibrated global trade environment.
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Key Takeaways of the report:
- Limited exposure to US market reduces overall economic impact.
- Major competitors face steeper tariffs and greater reliance on US trade.
- India’s services and pharmaceutical sectors remain unaffected.
- FTAs and trade diversification efforts are already reducing dependence on the US.
- Strategic policy shifts could further minimize risks and enhance competitiveness.
The report also stated that “while sectors like auto parts and jewellery may face short-term disruptions, India’s broader economic strategy positions it well to navigate the changing trade landscape—and even gain a competitive edge in the process”.
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