India's economy is expected to grow at a higher rate of 6.5% in FY2026, revised from the previous estimate of 6%, with GST reforms likely to cushion the tariff blow of precipitous US import tariffs, a report published on Wednesday said.
Credit rating firm ICRA said that active industry initiatives—such as diverting trade and diversification of markets—may help India weather the tariff shock.
But the agency warned that the sudden hike in tariffs would continue to put a squeeze on profitability and demand in several sectors. The US is an important market for India, with over 140 categories of exports going there, ranging from auto parts to seafood, the report pointed out.
While the weight of increased tariffs is expected to press on margins in FY2026, timely policy assistance and responsive business plans are curbing near-term disruption. Exporters are searching for new markets by diversifying destinations, enhancing product value, and routing trade via tariff-free platforms such as Mexico, Europe, and Dubai.
The US has imposed total duties of 50% on Indian imports—much larger than those charged to exporters from the likes of China, Vietnam, Bangladesh, and Japan.
ICRA states that while some sectors look more capable of mitigating the blow, others also have higher hurdles to cross that might pull down earnings in FY2026. Auto exporters, for example, are reversing the tariff blow by tapping fresh markets, increasing product sophistication, and leveraging overseas subsidiaries in tariff-free zones such as Mexico and Europe.
The report further noted that most companies are now reporting scant short-term effects, courtesy of cost pass-through maneuvers and robust customer ties. In the metal industry, no noticeable disruption in export volumes has occurred even in the face of more imposing tariffs, since companies have successfully passed the burden of duty to US customers, taking advantage of the nation's low capacity in niche products.
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