The Indian economy is expected to withstand the recently imposed 25 per cent tariff on Indian exports by the United States, with government sources estimating the impact on GDP to be minimal. According to reports, the loss to India’s GDP is unlikely to exceed 0.2 per cent, a manageable figure given the country’s projected GDP of Rs 330.68 lakh crore for the financial year 2024–25.
Trade between India and the US continues to be significant, reaching $131.8 billion in FY 2024–25. This includes $86.5 billion in Indian exports to the US and $45.3 billion in imports. Despite the new tariff measures, a large portion of this trade remains unaffected. Government sources noted that more than half of Indian exports to the US will not be impacted due to existing exemptions under Section 232 of the US Trade Expansion Act.
In real terms, only around $40–48 billion of Indian exports fall under the new tariff ambit. Products affected by the 25 percent duty include electrical and mechanical machinery (approximately $9 billion), gems and jewellery ($12 billion), shrimp ($2.24 billion), textiles and clothing ($10.3 billion), leather and footwear ($1.18 billion), animal products ($2 billion), and chemicals ($2.34 billion). However, pharmaceutical and electronic items, two of India’s major export categories, remain largely exempt from the duty.
Government officials emphasized that India would not compromise its national interest, especially when it comes to protecting the livelihoods of its farmers, entrepreneurs, and micro, small and medium enterprises (MSMEs). The government also reiterated that there would be no opening of the agricultural and dairy sectors to foreign producers, despite pressure from Washington. Specifically, officials said that India would not allow the import of genetically modified (GM) crops or non-vegetarian milk, citing concerns over price stability, domestic welfare, and religious sentiments.
Reports say that Agricultural and dairy markets are crucial for India’s economic and social fabric. The government remains committed to price stability and will not allow foreign products that threaten religious harmony or local livelihoods.
Although agriculture and allied sectors account for less than 20 percent of India’s GDP, nearly half of India’s 1.44 billion population is either directly or indirectly employed in these areas. Recognizing their socio-economic importance, the government has made it clear that these sectors cannot be exposed to international competition at the cost of domestic stability.
The US move to impose tariffs comes against the backdrop of stalled trade talks. According to officials, one of the primary reasons for the deadlock was the insistence by American farmers and dairy producers on access to the Indian market. India, however, has categorically declined such proposals, and this firm position is believed to have sparked discontent in Washington.
Nonetheless, government sources remain optimistic about the ongoing bilateral trade negotiations. Talks that began in November last year are said to be progressing steadily, with hopes that once an agreement is reached, discussions to roll back or soften the 25 percent tariff could follow.
Reports stressed that with India’s GDP nearing $4 trillion and a robust consumer base of 140 crore people, the relative impact of the tariff on overall economic performance remains minimal.
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