In a simulated scenario assessing the potential economic impact of a 20% flat tariff on Indian exports to the United States, the State Bank of India report predicts a loss of 50 basis points (bps) to India’s GDP.
However, the report also emphasized that this remains a highly unlikely scenario. It highlights the value-added loss across various sectors due to the imposition of such a tariff, with the cumulative impact running into billions of dollars.
SBI said, “Simulated impact of 20% flat tariff on Indian exports to result in loss of 50 bps to GDP”. The worst-hit sector would be agriculture, hunting, forestry, and fishing, with a projected loss of USD 1,543.4 million. The financial sector could see a loss of USD 1,426.9 million, followed by chemicals and chemical products at USD 1,106.5 million and textiles and textile products at USD 1,076.0 million.
Other impacted sectors include basic metals and fabricated metals (USD 804.7 million) and mining and quarrying (USD 512.4 million).
What Else For India’s GDP?
While the report suggests that such a tariff would have a noticeable impact on India’s export-driven sectors, it highlights the improbability of this scenario materializing. India and the US have engaged in multiple rounds of trade discussions to resolve tariff disputes and enhance bilateral trade.
The hypothetical assessment serves as a crucial reminder of the vulnerabilities that trade restrictions can introduce, especially for emerging economies reliant on external markets. As global trade dynamics evolve, Indian policymakers are expected to continue pushing for favorable agreements to safeguard export sectors and mitigate potential economic shocks.
Both India and the US have adjusted their tariff structures over the years, reflecting evolving trade policies and economic priorities. While US tariffs on Indian exports have remained relatively stable, India’s tariff adjustments appear to be more dynamic.
The report also mentioned that US tariff rate on Indian goods increased from 2.72% in 2018 to 3.91% in 2021, before slightly declining to 3.83% in 2022. India’s tariffs on US imports have risen from 11.59% in 2018 to 15.30% in 2022.
