India's Exports May Emerge a Winner if Trump Sticks to High Tariffs
By Reuters | 27 May, 2025

The high tariffs set to take effect against imports from China gives India an opening to increase substantially the size of its trade surplus with the US.

A successful trade agreement between India and the U.S. could boost exports and unlock new market access, India's finance ministry said in its monthly economic review on Tuesday.

"A successful U.S.-India trade agreement could flip current headwinds into tailwinds, opening up new market access and energising exports," the report said. 

Indian Trade Minister Piyush Goyal visited Washington last week to advance trade talks, with both sides aiming to sign an interim agreement by early July.

New Delhi is seeking to clinch a trade deal with the U.S. within the 90-day pause on tariff hikes announced by U.S. President Donald Trump on April 9 for major trading partners, which includes a 26% tariff on imports from India.

The U.S. is India's largest trading partner, with bilateral trade totalling about $129 billion in 2024. The trade balance is currently in favour of India, which runs a $45.7 billion surplus with the United States.

The finance ministry report also said that the government's direct tax exemptions, fiscal measures and recent rate cuts from the central bank could accelerate the recovery and lift growth towards the upper end of forecasts of 6.3% to 6.8% in the current fiscal year.

Government capital spending is playing a "pivotal role" in supporting economic activity, and shielding the economy from global shocks, the report said, noting that personal income tax cuts and the recent rate reduction by the central bank are also expected to spur consumption and private investment.

India has the potential to remain as one of the most promising destinations for investment amid ongoing global uncertainty, it said.

The report added that the Indian rupee has remained relatively stable and that foreign exchange reserves continue to provide a cushion against external shocks.

(Reporting by Aftab Ahmed and Manoj Kumar; writing by Shilpa Jamkhandikar; editing by Mark Heinrich and Maju Samuel)