India might lose its edge on practically $64 billion worth of exports to the United States after President Donald Trump announced a 25% tariff with an additional 10% on the purchases of Russian oil as per reports.
An internal government assessment reviewed by Reuters claims that almost 80% of India’s exports to the U.S., such as drugs, gems, apparel and petrochemicals, could see a minimum rise in price by about 10% eroding their competitiveness with rivals like China.
The immediate impact on GDP is estimated to be limited to 40 basis points due to the comparatively small export contribution in India’s $4 trillion economy. Despite the uncertainty caused by tariff hikes, the Reserve Bank of India held rates steady on Wednesday and maintained its 6.5% GDP growth prediction for the current April-March fiscal year.
Following Trump’s announcement of the surprisingly high tax on Indian imports and the unidentified penalty, the Indian government created the trade effect assessments. According to four Indian government officials who spoke to Reuters, the Indian government included a 10% penalty for purchasing Russian oil in its evaluation report, raising the cost to 35%. Since they were not authorized to speak to the media, they refused to be named.
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Limited Effects on GDP, but Huge Sectoral Losses
Exports, while being only 2% of India’s GDP, could add somewhere to a drop of 40 basis points to growth. However, the Reserve Bank of India kept its growth forecast at 6.5%, saying the strength of India’s $4 trillion economy can buffer against trade shocks.
Government sources said the estimates for losses due to trade would remain preliminary and might vary depending on Washington’s final action on imposition of penalties. Trump is likely to decide after U.S. envoy Steve Witkoff finishes peace consultations in Moscow just ahead of a sanction’s deadline on Russia over the Ukraine warfare.
Russia Oil Purchases Add to Diplomatic Strain
Meanwhile, NSA Ajit Doval is talking in Russia about crude import and defence cooperation, including the long-pending S-400 missile system. This follows on a visit to Moscow amid U.S. pressure to scale down oil purchases from Russia, with Foreign Minister S. Jaishankar poised to follow up diplomatically in the weeks ahead.
New Delhi appears to be trying to balance its strategic ties with Moscow while responding to Washington’s concerns, as Trump’s trade measures may very well alter the India-U.S. relations and escalate competition for India’s export sectors.
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