Key Points
India's exports to US most vulnerable in 6 key sectors
Bilateral trade reached $124 billion in 2024
Electronics and pharma drive trade surplus
Tariff impact estimated at $3.6 billion
However, it adds that despite India having the highest tariff differential of 9 per cent with the US among major nations, the reciprocal tariff impact will be only on 1.1 per cent of India's GDP, as India's exports to US in the six most vulnerable sectors amount to only 1.1 per cent of its GDP.
The report says "With a tariff differential of 9 per cent and assuming that the elasticity of India's exports to the US with respect to tariffs is -0.5 (implying a 1 per cent rise in the tariff rate would reduce India's exports to the US by 0.5 per cent), there will be a loss of USD3.6b in exports to the US, which is only 0.1 per cent of India's GDP (-0.5*9, 4.5 per cent fall in India's exports to the US)."
The report identified the six most vulnerable items as electrical machinery, gems and jewellery, pharma products, machinery for nuclear reactors, iron and steel, and seafood. These six items sum to USD 42.2 billion, amounting to 52 per cent of the total exports to the US and 1.1 per cent of India's GDP.
Bilateral trade between India and the US was USD 124 billion in the calendar year (CY) 2024. Exports from India to the US reached USD 81 billion, and imports from India to the US amounted to USD 44 billion, resulting in a trade surplus of USD 37 billion for India.
The report says items like agriculture and dairy products, which have a higher tariff differential value, constitute only USD 0.5 billion and are vulnerable but less likely to be affected because of low value.
Items like energy commodities, metals and auto in which Indian has a trade deficit with the US, i.e India imports more than it exports, are less vulnerable to the tariffs as imposing higher tariffs on these items will hurt the US more than India.
Overall, the report believes that the impact of reciprocal tariffs (assuming full product-level reciprocity) on India will be limited if we compare its impact with nations like Mexico, Canada and China.
"Notably, India faces the largest tariff gap if compared with other major nations. However, the US' trade deficit with India (or India's surplus with the US) is only the 10th highest among the US's trading partners, which might cushion it from specific targeting, in contrast to Mexico, Canada, and China," adds the report.
India's top exported items to the US are electronics (15.6 per cent of total exports to the US), gems & jewellery (11.5 per cent), pharma products (11 per cent), machinery for nuclear reactors (8.1 per cent) and refined petroleum products (5.5 per cent).
India's goods trade surplus with the US has seen a twofold increase in the past decade, rising from USD 9 billion, 0.9 per cent of India's GDP in CY15 to USD 37 billion, 1.0 per cent of GDP in CY24.
The surge in the trade surplus is primarily because of a heightened trade surplus in electronic items after the implementation of a production-linked incentive (PLI) scheme in 2020.
Apart from electronic items, higher exports of pharma and textiles have also driven India's trade surplus with the US over the past decade.
