The quick affect of latest U.S. tariffs on Indian exports could seem restricted, however their secondary and tertiary effects on the economy pose challenges that have to be addressed, the Finance Ministry mentioned in a report on Wednesday (August 27, 2025) amid the U.S. effecting a steep 50% tariff on shipments from India.
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Ongoing India-U.S. commerce negotiations are vital in addressing these points, together with the secondary and tertiary effects of excessive tariff by the US on Indian items, the month-to-month financial overview launched by the Ministry mentioned.
The steep 50% tariff on Indian items getting into the U.S., which got here into impact from Wednesday (August 27, 2025), would affect exports price greater than $48 billion. The sectors which might bear the brunt of the excessive import duties imposed by the Trump administration embody textiles/ clothes, gems and jewelry, shrimp, leather-based and footwear, animal merchandise, chemical compounds, and electrical and mechanical equipment.
“While the immediate impact of recent U.S. tariffs on Indian exports may appear limited, their secondary and tertiary effects on the economy pose challenges that must be addressed. In this context, the ongoing India-U.S. trade negotiations will be crucial,” it mentioned.
In line with the worldwide shift in the direction of diversification and strategic realignment, it mentioned, India is actively pursuing a diversified commerce technique to maintain its resilient commerce efficiency.
“This includes the recently concluded FTA with the UK and EFTA and ongoing FTA negotiations with the US, EU, New Zealand, Chile, and Peru. But, these initiatives will take time to show results and may not fully address the shortfall in exports to the US that may arise if the current tariff rates on India persist,” it mentioned.
Observing that India’s economy stands at a vital juncture, the report mentioned, its sturdy financial efficiency over the previous few years, together with coverage stability and excessive infrastructure funding, has earned it a sovereign ranking improve by S&P from ‘BBB-‘ to ‘BBB’.
“This upgrade serves as a testament to the economy’s robust macroeconomic fundamentals and ongoing reform initiatives. The assessment comes at a moment when the economy has exhibited considerable resilience in the face of global challenges, with strong domestic demand and prudent policy management contributing to economic stability,” it mentioned.
On the home entrance, the report mentioned, aided by above-normal precipitation and higher sowing of kharif crops, the headline inflation could stay reasonable within the close to time period.
“An increased market arrival in Q1, comfortable buffer stocks and better output prospects, coupled with stable global oil markets, might keep the prices of food grain moderate. The downside risks to global growth are likely to keep international commodity prices in check, partly offsetting the impact of higher tariffs,” it mentioned.
To improve financial progress amidst the difficult international panorama, the Prime Minister has introduced a couple of initiatives focusing on coverage reforms.
First, the creation of a Task Force for Next-Generation Reforms goals at additional simplifying rules, reducing compliance prices, and fostering a extra enabling atmosphere for startups, MSMEs, and entrepreneurs, it mentioned, including, the deliberate rollout of next-generation GST reforms within the coming months, with an emphasis on decreasing the tax burden on important objects, is predicted to offer direct reduction to households and increase consumption demand.
Complementing these measures, the ranking improve is anticipated to cut back the borrowing prices, appeal to higher overseas capital inflows, widen the entry to international capital markets, increase disposable revenue, scale back inflationary pressures, reduce enter prices for companies, and help progress, it mentioned.
Amid international uncertainties, these authorities initiatives are charting a progress trajectory pushed by long-term reforms that can increase disposable revenue, scale back inflationary pressures, and scale back prices for companies, it mentioned.
It additional mentioned that the federal government’s focus on employment technology by way of schemes just like the PM Viksit Bharat Rozgar Yojana, mixed with reforms within the training sector and talent improvement initiatives, goals to create a workforce that’s well-prepared for the calls for of the altering world.
Taken collectively, these reform initiatives and the improved sovereign ranking will underpin progress by encouraging funding, stimulating consumption, rising employment alternatives and strengthening confidence within the economy’s long-term trajectory, it added.
