India’s economy is projected to grow at 6.5 per cent in FY2026, higher than the earlier forecast of 6 per cent, supported by GST reforms that are expected to cushion the impact of steep US import tariffs, a report by credit rating agency ICRA said on Wednesday.
The report noted that proactive strategies adopted by industries, including trade rerouting and geographic diversification, could help India withstand the tariff shock. However, it warned that the high tariff burden may weigh on sectoral profitability and demand across several industries.
India exports over 140 product categories to the United States, making the market crucial for sectors ranging from auto components to seafood. While the high US tariffs are expected to pressure margins and demand in FY2026, the report highlighted that industry responses and policy support are limiting immediate damage.
Exporters are diversifying their markets, enhancing product value, and routing trade through tariff-exempt regions such as Mexico, Europe, and Dubai. The United States has imposed cumulative tariffs of up to 50 per cent on Indian imports, significantly higher than those applied to exporters from China, Vietnam, Bangladesh, and Japan.
While some industries appear capable of mitigating the impact, others are likely to face challenges that could affect earnings through FY2026. In the auto sector, exporters are responding by diversifying markets, increasing value addition, and leveraging subsidiaries in tariff-free regions.
Most companies report minimal immediate impact, aided by cost pass-through strategies and customer loyalty. In the metals sector, the report observed no significant volume disruption despite tariffs, as companies managed to pass duties fully to US buyers, supported by limited domestic US manufacturing capacity for specialised products.
– IANS