US Tariffs Impact Indian Exports

US Tariffs Slam Indian Exports, But Economy Shows Resilience

The US has slapped a 50% tariff on certain Indian goods, causing exports to plummet and sparking concerns about the economy's future. Despite this, the Indian economy has shown resilience, with retail inflation dropping to a 99-month low.

The US tariffs, imposed on ready-mades, polished diamonds, shrimps, and leather goods, have led to a 20.3% decrease in exports to the US in September. This marks the fourth consecutive monthly decline, erasing over $3.3 billion in monthly trade since May. The worst hit sectors include textiles, gems & jewellery, engineering goods, shrimps, and chemicals.

The Reserve Bank of India (RBI) has warned about the adverse impacts of the ongoing trade war with the US. It described the US tariffs as a 'supply-side shock' that could have more adverse impacts on the US than its trading partners. The RBI bulletin also noted that higher US tariffs could reduce India's merchandise exports to the US, negatively impacting net external demand.

Despite these challenges, the Indian economy has shown remarkable resilience. Retail inflation fell to a 99-month low of 1.54% in September, amidst global uncertainty and weak external demand. The government has justified GST rate cuts, which are expected to boost domestic demand and output, mitigating the adverse impact of US tariffs. Exports to non-US markets grew by 10.9% on a year-on-year basis in September.

While the US tariffs have significantly impacted Indian exports, the Indian economy has demonstrated its ability to weather external shocks. The government's GST rate cuts and increased exports to non-US markets are expected to help mitigate the adverse effects of the trade war. However, the RBI's warnings highlight the need for continued vigilance and strategic planning to navigate these challenging economic waters.