India receives boost in manufacturing, exports after US cuts tariffs

Bengaluru: The US decision to slash reciprocal tariffs on Indian goods to 18 per cent from 25 per cent, as part of its trade deal with India, is being seen as structurally positive for India’s medium-term growth and external stability.

Analysts say the move will improve market access and tariff certainty, boosting exports, supporting manufacturing investment and strengthening FDI inflows.

Over time, the agreement is also expected to help narrow the current account deficit, stabilise the rupee and reduce India’s vulnerability to global shocks.

“With both economies seeking to de-risk supply chains, counter China-centric dependencies and deepen strategic ties, the proposed India-US trade deal is shaping up as a pivotal catalyst,” Axis Direct said in a report.

“For India, the deal aligns with its manufacturing push under the PLI schemes, export diversification strategy and ambition to move up the global value chain. For the US, India offers a large, reliable market and a strategic manufacturing alternative in critical sectors.”

US total goods trade with India stood at an estimated Rs 1,163 crore ($128.9 billion) in 2024. US goods exports to India were valued at Rs 3,74,673 crore ($41.5 billion), up 3 per cent from 2023, while imports from India totalled Rs 7,88,168 crore ($87.3 billion), an increase of 4.5 per cent year-on-year, according to available data.

Calling the tariff reduction a major tailwind for Indian businesses, Aravind Melligeri, Executive Chairman and CEO, Aequs Limited, said, “The reduction in tariffs from 50 per cent to 18 per cent, coupled with the recent India-EU FTA, restores India’s relevance in global supply chains.”

He added that the move materially improves India’s competitiveness relative to other Asian manufacturing hubs. “With China at 30 per cent, Vietnam at 19 per cent and India at 18 per cent, it is a significant boost for our toys and aerospace businesses, where customers were earlier paying 50 per cent tariffs on Indian supplies.”

Industry bodies echoed similar views. FICCI President Anant Goenka said, “The reduction of reciprocal tariffs on Indian goods will materially improve the competitiveness of Indian exports in the world’s largest import market. If implemented effectively, it can provide a meaningful boost to India’s export growth and broaden market access.”

Kumar Mangalam Birla, Chairman, Aditya Birla Group, said the agreement would strengthen bilateral economic ties and unlock fresh investment opportunities. “The reduced tariffs will help shape more resilient supply chains, unlock manufacturing opportunities and drive long-term competitiveness in both the US and India,” he said.

The tariff cut has also come as a boost for India’s solar sector, for which the US is among the most important overseas markets. “The US decision represents a strategic turning point for the solar sector,” said Prashant Mathur, CEO of Saatvik Green Energy. “India’s solar exports, including cells and modules, have already reached billions of dollars, making the US our most important foreign market.”

Explaining the broader impact, Emmvee CMD DV Manjunatha said, “Lower tariffs and improved market access provide incremental advantages that enhance competitiveness and create opportunities for Indian businesses to scale and diversify as more details emerge.”