India's low US tariff exposure reduces economic risks

India's exposure to tariffs from the United States is limited, which helps reduce direct risks, according to S&P Global Ratings. However, there could be indirect effects, especially on the steel and chemicals sectors, if trade routes change. Currently, India’s exports to the US account for 2.3% of its GDP. The report noted that India’s exposure to US tariffs on aluminum and steel stands at 4.5%. This is lower than South Korea's 4.7%, which is the highest in the Asia-Pacific region. Despite the low direct exposure, India’s increasing trade surplus with the US might make it susceptible to potential US tariffs aimed at its trading partners. S&P mentioned that the overall impact from these tariffs would likely be minimal for India. This is because exports make up just over 10% of its GDP. Most Indian companies are well-equipped to handle temporary slowdowns in earnings. India's economy continues to grow, supported by solid infrastructure and strong consumer spending. For the fiscal year 2025, India's economic growth is expected to slow slightly to 6.7% from 6.8% the previous year. Still, it will remain the fastest-growing economy in the Asia-Pacific region. Growth is projected to improve to 7% by fiscal year 2027. Inflation in India is predicted to decrease to an average of 4.4% in FY25 from 4.6% in FY24. This moderation in inflation might lead to a reduction in the policy interest rate by 75 basis points to 5.5% in the last quarter of FY25, according to the report.