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Informist, Thursday, Apr. 3, 2025

 

NEW DELHI – The possibility of a bilateral trade agreement with the US suggests that Washington may eventually lower tariffs for India, Barclays said in a report.

 

India's domestic orientation may offset some of the pressure from large reciprocal tariffs, Barclays said. "However, ultimately weaker global growth and the downside effects of US tariffs on exports--even if temporary--suggest the RBI (Reserve Bank of India) will likely remain on an easing track," the report said. 

 

The US has imposed reciprocal tariffs on its trading partners, including a 27% duty on imports from India, as per US President Donald Trump's executive order, even though the President himself announced a 26% tariff on India. 

 

Barclays said that the tariff imposed on India is higher-than-expected, and it reinforced the bank's view that the RBI's Monetary Policy Committee may deliver three more repo rate cuts, including one next week, and lower the repo rate to 5.50% from the current 6.25%. 

 

India and the US have been working on a bilateral trade agreement for over a month now, with media reports saying that the 'terms of reference' have already been finalised.

 

"We believe India is likely to take a conciliatory approach to tariffs and is likely to be willing to negotiate to reduce tariffs on a number of product categories, while also easing some market access barriers," Barclays said. "Some tariffs have already been reduced, most notably in the Union Budget presented on 1 February. That said, some categories, including dairy and agriculture, could prove more politically difficult for the Indian government to concede on."

 

India's commerce ministry Thursday said that it was carefully examining the implications of the various announcements made by Trump. The ministry is engaged with all stakeholders, including Indian industry and exporters, taking feedback of their assessment of the tariffs and assessing the situation, it said in a release. 

 

Barclays said that the RBI might allow some renewed weakness in the rupee in the near term. "Our previous analysis showed that USDINR (dollar/rupee) could move sharply higher in the wake of tariffs. Now that there has been a correction lower in the NEER (Nominal Effective Exchange Rate), we doubt the RBI will want to see renewed appreciation," the report said.  End

 

Reported by Shubham Rana

Edited by Akul Nishant Akhoury

 

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