US President Donald Trump has imposed heavy tariffs on Indian imports. After this, Indian exporters are disappointed, but S&P Global Ratings Director Yifarn Phua says that this will not affect India's economic progress. India's sovereign rating outlook will remain positive.
It is worth noting that the US has imposed a total tariff of 50 percent on India as a penalty for buying oil from Russia. A 25 percent tariff has been implemented from August 7, and the remaining 25 percent will start from August 28. But experts believe that India's economy will easily withstand this shock.
Phua said in a webinar on Asia-Pacific sovereign ratings on Wednesday that India's economy is not much dependent on trade. India's exports to the US are only 2 percent of its GDP. Therefore, these tariffs will not have any major impact on India's economic growth.
Why will India not be affected?
In May last year, S&P gave a positive outlook to India's sovereign rating 'BBB-'. The reason for this was the country's strong economic growth.
According to the latest forecast of S&P, India's GDP growth will be 6.5 percent this financial year. This is equal to last year. Phua said that major export sectors like pharmaceuticals and consumer electronics have been exempted from tariffs.
He said, "In the long run, we do not think that these tariffs will be a big blow to India's economy. Therefore, India's positive outlook will remain intact."
No impact on investment, too
When Phua was asked whether the US tariffs would affect investment in India, he said that under the 'China Plus One' strategy, companies have been expanding their business in India for the last few years. These companies are mostly coming here to meet India's huge domestic demand, not just to export to the US.
Phua said, "Many companies are investing in India because the middle class is growing rapidly here. Those who are investing in India their aim is not just the US market."
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