India vs reciprocal tariffs: S&P, Moody's, and SBI Research forecast for post-April 2 impact

As the world economy awaits the American reciprocal tariffs to kick in from April 2 next month, concerns are growing in India over the impact of new trade policy by US President Donald Trump. Amid the reports of India getting a breather from the tariff threats to frantic negotiations for the bilateral trade agreement, investors are closely watching the developments ahead of the deadline. However, top rating agencies and experts say that India may see a very limited effect of the like-for-like duties.

In its latest report, S&P Global Ratings said that the low exposure will help India to reduce the impact of the tariffs. India’s exports to the US account for just 2.3 percent of its GDP, the agency said. This shows limited impact on the export sector. However, the report added that the reciprocal tariffs may have some indirect impact on some sectors such chemicals and steel. The report titled ‘Tariff hit among Asia-Pacific firms’ said that India Inc is capable of bearing the earning slowdown on back of robust infrastructure and healthy levels of consumer spending.

Similarly, Fitch has also made a positive forecast for the Indian economy in the post-tariff environment. “India is somewhat insulated…,” the global rating agency said in its latest report. Fitch said that given India’s ‘low reliance on external demand’ and ‘high business confidence,’ situation may not be that troublesome for New Delhi.

Moody’s on the other hand predicts impact on some sectors. Like S&P Global, Moody’s has also said that steel, chemicals and automotive sectors may feel the tariff heat. These sectors have most exposure and tit-for-tat duties may hamper the demand trend. Sectors such as shipping, mining and oil and gas have better chance to withstand the effect of the Trump tariffs.

Goldman Sachs says that there will be a 10-60 bps hit on India’s GDP due to the tariffs. UBS Securities has also downplayed the impact of tariffs on India. "Not worried about direct tariff impact on India, worry is from a global growth slowdown hitting India. Tariff may be a shock in early April, but bilateral talks may ease the impact," Vishal Goyal and Gautam Chhaochharia of UBS Securities were quoted as saying by CNBC-TV18.