S&P upgrades sovereign ratings to BBB from BBB-, says tariffs not to impact India's growth

S&P Global Ratings Director YeeFarn Phua has said that Trump tariffs will not have any impact on India's growth, as it is not a trade-oriented economy, and its sovereign ratings outlook will continue to remain positive. In May last year, S&P had upgraded the outlook on India's sovereign rating of 'BBB-' to positive, citing robust economic growth. For which the company has now upgraded the sovereign rating to BBB. The rating upgrade highlights India’s consistent economic growth, with better fiscal and monetary management amid external shocks.

S&P estimates India's GDP growth in the current fiscal year at 6.5%, the same as it was in the previous financial year. YeeFarn further said major sectors, like pharmaceuticals and consumer electronics, which export to the US, are exempted from tariffs. He said, ‘Over the longer term, we don't think this (higher tariffs) will be a big hit (on India's economy), and therefore, the positive outlook on India remains’.

On whether US tariffs would impact investment flows into India, he said the 'China plus one' strategy has played out for businesses over the last few years, and companies are setting up businesses in India mainly to cater to domestic demand. He also said ‘Many businesses are going there not because they are looking to export just to the US. Many of them are going there because of the huge domestic market as well. An emerging middle class is getting larger...So, even for those who are looking to invest more in India and looking to export, it might not necessarily be the US market.

On August 6, US President Donald Trump announced an additional 25% tariff on all Indian imports, on top of an existing 25% duty, taking the total to 50% from August 27. The White House said the measure responds to India's continued purchase of Russian oil. In 2021-25, the US was India's largest trading partner. The US accounts for about 18% of India's total goods exports, 6.22% in imports, and 10.73% in bilateral trade.

With America, India had a trade surplus (the difference between imports and exports) of $35.32 billion in goods in 2023-24. It was $41 billion in 2024-25. In 2024-25, bilateral trade between India and the US reached $186 billion. India exported goods worth $86.5 billion while imports stood at $45.3 billion.