Extra 25% US tariff risks making Indian exports unviable, says Crisil
New Delhi: Following the imposition of a 25 percent levy by the US on Indian goods—linked to India’s Russian oil purchases—the United States is no longer considered a valuable export market for India Inc., according to a Crisil report.
What Crisil is flagging
Economic Times reported, citing CRISIL, that the earnings in diamond polishing, shrimp, home textiles and carpets face the sharpest pressure.
“Additional 25 percent tariff to make exports to US unviable for India Inc,” the domestic rating agency said, adding that other sectors, including ready-made garments (RMG), chemicals, agrochemicals, capital goods and solar panel manufacturing, which have sizable trade exposure to the US, also stand to be impacted.
The eventual hit will vary by each sector’s exposure, the scope to pass on incremental costs to customers and the relative tariff disadvantage versus competing nations.
Second-order shocks and what to watch
Crisil cautioned that a potential second-order impact—such as a slowdown in US demand and disparate tariffs across countries that could reshape global trade—warrants close monitoring, alongside any bilateral treaty between India and the US and what both sides achieve under it.
The credit impact can be mitigated by strong corporate balance sheets, potential bilateral trade agreements with other countries and the possibility of support from the Indian government.
Why the stakes are high
In FY25, the US made up a fifth of India’s merchandise exports and around 2 percent of overall GDP.
Crisil said diamond polishing, shrimp and home textiles may see sales volumes drop because of high reliance on US trade and higher costs from partially absorbing tariffs, ultimately denting earnings.
The US accounts for about a fourth of diamond polishers’ revenues, and tariffs worsen the picture amid already tepid demand for natural diamonds.
For shrimp exporters, the US brings in nearly half of revenue and India is now the highest-taxed supplier to that market, making it tougher to compete with Ecuador, which enjoys lower tariffs.
Wider exposure and ongoing assessment
All the other sectors with heavy US dependence will face varying degrees of strain. The agency said it will continue to closely monitor the situation and evaluate the impact on the credit risk profiles of its rated companies.
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