How will steep tariffs imposed by Trump affect Indian exports and economy? What SBI report says?
Indian economy is expected to remain unshaken by the imposition of steep US tariffs on its exports, according to the latest State Bank of India (SBI) report. SBI is an Indian multinational public sector bank and financial services body.
The SBI report highlighted that the strong fundamentals of the Indian economy will come as a rescue in these trade tensions, and the country stands firmly in the long term due to sectoral robustness.
The report says the imposition of 25 per cent tariff on India with penalty is a “Bad Business Decision” but the forces of Global Supply Chain should auto adjust and cushion the impact.
The SBI report said, “Indian businesses and firms must reinvigorate the ‘Made in India’ as the hallmark of unquestionable Quality. Not surprisingly, US GDP, Inflation, and currency face a greater risk of downgrades compared to India.”
India has diversified its export destinations
“Though the US is India’s top exporter (20 per cent in FY25), India has diversified its export destinations and the top 10 countries only accounted for 53 per cent of exports,” the report added.
The SBI research report highlighted the sectoral prowess of chemicals, textiles, and AYUSH-based products that will continue to perform strongly due to competitive edge and market expansion efforts.
The report highlighted the government's scheme, saying, "Exports of smartphones and solar cells to the US have increased because of the Production-Linked Incentive (PLI) scheme. Changes in the GST for cut and polished diamonds have also boosted gems and jewelry exports to the US. For other products, strong demand from the US has resulted in higher exports."
Drug shortages and price hikes likely for American citizens
SBI research noted that India supplies nearly 47 per cent of the pharmaceutical needs to the US, and if the US shifts its manufacturing and API production to other countries, it might take 3-5 years, which can cause drug shortages and price hikes for the American citizens.
Earnings of Indian pharma companies could be hit
The report highlighted a slight impact on India’s pharma sector and stated, “As the US accounts for 40 per cent of India’s pharma exports, if the 25 per cent tariff continues, it may hit earnings of pharma companies by 2-8 per cent in FY26.”
US companies may import solar modules from tariff-free nations
In solar modules, India has been emerging as the prime destination of the US solar industry as imports from India to the US have increased massively in 2023 and crossed the mark of 8GW in 2024. The report noted, “ With this new tariff, products from India could become costliers for US buyers. So Indian supply is likely to become less attractive to US companies, and they may import solar modules from tariff-free nations.”
Prakash Kumar Pandey