Growing Global Demand for Indian Exports May Offset Impact of US Tariffs

India has been able to expand its export base to countries such as the Middle East, Europe, Latin America, and Australia in the past few years, an action anticipated to mitigate the effect of the US tariff hike.

While the US continues to be India's leading export country, all of its major products being exported there are also being shipped to more than 15 other significant global markets during the last three financial years, the European Times reports.

"India's export tale is definitely at a juncture. Though the US will remain a critical partner, the spectacular rise in exports to countries like the Netherlands, UAE, Australia, Saudi Arabia, South Africa, Brazil, and Mexico reflects that India is no longer one-market dependent. These countries are not only consuming India's product basket but also providing avenues for growth into cutting-edge technologies and clean products," the article observes.

Exports to these large markets together touched $162 billion during 2024-25. Indian exports to these nations have accelerated by 19 per cent per annum over the past three years, leaving the 15 per cent growth in exports to the US behind, testifying to the robustness of India's diversified trade basket.

India's huge domestic market also insulates the economy from external shocks, confining the scope of any negative impact of the US tariff increase. Fitch Ratings, attributing India's rapid growth, maintained its FY26 GDP estimate unchanged at 6.5 per cent while increasing the FY27 forecast to 6.3 per cent from 6.2 per cent in December.

A recent Morgan Stanley report also underlined India as the "best placed country in Asia" in the face of worldwide uncertainty over US tariff threats. According to the report, India's low ratio of goods exports to GDP and strong domestic market leave it less exposed to decelerations in global trade.

While India is exposed to direct tariff risk, we estimate on balance India is less vulnerable to slowdown in global goods trade given that it has the region's lowest goods exports to GDP ratio," the report added.

India's GDP growth picked up to a robust 7.8 per cent in Q1 FY26 (April-June) from 6.5 per cent in the corresponding quarter of FY25. The farming sector also recovered with 3.7 per cent growth, up from 1.5 per cent during the corresponding period of the last year when unpredictable monsoons impacted production.

The manufacturing and construction industries clocked 7.7 per cent and 7.6 per cent growth, respectively. The services or tertiary sector expanded at 9.3 per cent, a good improvement from 6.8 per cent in Q1 FY25.

Investment activity, as captured by Gross Fixed Capital Formation, accelerated to 7.8 per cent for the quarter over the corresponding period last year, indicating a higher level of economic confidence.