Indian Export Growth Poised to Surge Despite Tariff Pressure

Indian Export Growth: As India and the United States move closer to finalising a long-anticipated trade agreement, a new report by SBI Research paints an optimistic picture of India’s export potential, regardless of whether the deal fulfils expectations or faces setbacks.

Titled “Tariff Truce on the Horizon: India, USA Set to Seal the Trade Deal”, the report arrives at a critical juncture. Just as U.S. President Donald Trump signalled that BRICS nations, including India, could “pretty soon” face a 10% tariff as part of his revived reciprocal trade push, the report asserts that Indian export growth is poised to rise, deal or no deal.

“Even if the India-US deal doesn’t come up as desired and 10% additional tariffs are imposed on India, there are various avenues for India to diversify its exports,” the report confidently states.

Indian Export Growth: Global Tariff Turmoil Presents a Window of Opportunity

The United States has recently increased tariffs on imports from 23 countries, dramatically reshaping global trade dynamics. Unlike many others, India remains relatively insulated from this hike. SBI Research believes this offers India a golden opportunity to gain global market share, particularly in chemicals, pharmaceuticals, apparel, agricultural products, and processed foods.

Chemicals and Pharmaceuticals: A High-Growth Frontier

India holds a revealed comparative advantage (RCA) in chemicals and pharmaceuticals—two sectors heavily impacted by recent tariff shifts on Chinese and Singaporean exports to the U.S.

The report estimates that if India captures just 2% of the US import share currently dominated by China and Singapore, it could add 0.2% to its GDP. A further 1% reallocation from countries like Japan, South Korea, and Malaysia could contribute another 0.1%.

To make this a reality, SBI Research recommends targeted trade talks to lower tariffs on Indian chemical exports to below 25%, making them more competitive with Singaporean products.

Indian Export Growth: Apparel Exports -Indian Export Growth Ready to Stitch New Gains

Currently holding about 6% of U.S. apparel imports, India is eyeing new ground as tariffs strike Bangladesh, Cambodia, and Indonesia—nations long considered cost-effective sourcing hubs.

“Capturing an additional 5% share in U.S. apparel imports could potentially add 0.1% to India’s GDP,” the report highlights.

But the path forward demands upgrades in cost efficiency, logistics turnaround times, and potentially PLI-like (Production Linked Incentive) support to empower large-scale textile producers.

Surprising Gains from Asian Markets

A less-anticipated advantage comes from Asian economies now on the receiving end of U.S. tariff hikes. India can strategically expand exports to those very countries, offering them alternate supply sources in categories like:

• Agricultural goods

• Livestock and processed food

• Metal scrap and recyclable waste

• Animal and vegetable processed products

As access to American goods tightens for these nations, India has an open runway to plug the supply gap.

Tackling Non-Tariff Barriers: Pharma and AYUSH

Beyond tariffs, non-tariff barriers (NTBs) are limiting India’s trade potential in key growth areas like generic pharmaceuticals, AYUSH products, and organic foods.

SBI Research emphasises that regulatory bottlenecks in the U.S. and EU markets are blocking Indian products from achieving their full export value. If these are addressed in the upcoming trade deal, India could gain an additional $1–2 billion in exports.

“Removing NTBs could dramatically boost exports in sectors where India already has a manufacturing and knowledge edge,” the report notes.

Addressing the India-ASEAN Trade Deficit

While the India-US conversation captures headlines, the report also calls attention to India’s swelling trade deficit with ASEAN nations, which has surged from $16 billion in FY21 to $45 billion in FY25.

The culprit? Weak rules of origin in the ASEAN-India Free Trade Agreement (AIFTA) allow Chinese goods to be rerouted via ASEAN to avoid direct tariffs.

“India must reform tariff distortions and plug these loopholes to avoid becoming a dumping ground,” the SBI report urges.

Indian Export Growth: Resilience in a Turbulent Trade World

Whether the India-US mini trade deal meets expectations or includes hard-to-swallow concessions, the shifting global tariff structure is not necessarily a setback—it may be India’s moment to rise.

SBI Research concludes with a call to action:

“India has the resilience and sectoral strength to diversify its export base. With appropriate trade and industrial policy support, it can convert global tariff shocks into a strategic advantage.”

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