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Informist, Thursday, Mar. 20, 2025

 

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--S&P: India's low US exposure reduces tariff risks 
--S&P: Indirect effect of US tariffs may hit India's steel, chemical sectors 
--S&P: Indian cos protected by robust growth, strengthened credit quality 
--S&P: Most rated Indian firms can withstand temporary earnings slowdowns 
 

NEW DELHI – A robust economy and a low exposure to the US would protect India from the effects of US President Donald Trump's tariff policies, S&P Global Ratings said on Thursday. The rating agency projects the Indian economy to grow 6.7% in 2025-26 (Apr-Mar).

 

US tariffs may also have a limited indirect impact on India as its export sector amounts to just over a tenth of its GDP, S&P said. However, new tariffs could disrupt some sectors. "India's low US exposure reduces tariff risks, but indirect effects, such as trade redirection to the country, could hit the steel and chemicals sectors," S&P said in a report. 

 

The US has already imposed 25% tariff on all its steel and aluminium imports. Trump has said that US will levy reciprocal tariffs on several countries, including India, from Apr. 2. According to S&P, India's growing trade surplus with the US could subject New Delhi to new tariffs. 

 

Efforts by Indian firms to improve their operational and financial strength over the years are also reducing credit risk from the tariff wars. Most Indian firms rated by S&P can withstand temporary earnings slowdowns, the rating agency said.

 

S&P expects median revenue and earnings before interest, taxes, depreciation, and amortisation, or EBITDA, growth of its rated firms in India to reach nearly 8% in FY26. Steel, chemicals and airport sectors will likely report above-average EBITDA growth, the rating agency said. 

 

"In our base case, steel producers will benefit from a modest decline in input prices and a substantial increase in volumes following recent capacity additions, although product prices will likely stay rangebound," S&P said. "This is assuming no impact on steel prices from trade diversion under the US tariffs." The chemicals sector will continue to recover following the downturn in 2024.

 

India's auto sector has a high dependence on US markets and some firms such as Tata Motors Ltd., via Jaguar Land Rover Automotive, has relatively high exposure to the US. "The firm (Tata Motors) could be affected if the US imposes tariffs on automobiles made in the UK," S&P said. 

 

S&P expects the auto sector to post modest growth as it enters a cyclical slowdown after a period of sharp sales gains that peaked in 2023. "While the Indian economy is also slowing after a period of brisk expansion, looser monetary policy and government initiatives to boost consumer demand should fortify demand for the sector," the rating agency said.  End

 

Reported by Shubham Rana

Edited by Tanima Banerjee

 

 

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