India's exports to US may decline by $2-7 billion in FY26 post reciprocal tariff: Ind-Ra

Ind-Ra on Friday said India's exports to the US may decline by $2 billion to $7 billion in FY26 if the reciprocal tariffs being contemplated by the US is put into place.

India's exports to the US rose by 5.57% to $59.93 billion during April-December this fiscal. On the other hand, imports during the first nine months of 2024-25 grew by 1.91% to $33.4 billion

The US is the largest trading partner of India from 2021-22 and accounts for about 18 per cent of India's total goods exports, over 6 per cent in imports and about 11 per cent in bilateral trade.

India Ratings and Research (Ind-Ra) estimates suggest that should reciprocal tariffs be imposed by the US, India's exports to the US may decline anywhere between $2 billion and $7 billion in FY26.

"However, the weighted average tariff differential is around 7 percentage point (pp), and a more plausible scenario as per Ind-Ra is a decline in exports to the US by $2 billion-3.5 billion, leading to a decline in the GDP growth in the range of 5-10 bps from our current estimate of 6.6%," said Devendra Kumar Pant, Chief Economist and Head Public Finance, Ind-Ra.

Clarity will likely emerge in the next four to six weeks, following the discussions between the two governments. Therefore, the emerging geoeconomic situation is a key monitorable for the Indian economy.

Bilateral trade negotiations, defense and energy pacts between India and the US could minimise the adverse impact of reciprocal tariff for India, Ind-Ra said.