India’s resilience stands out as tariffs impact global trade

New Delhi: India's economy shows resilience despite global trade and fiscal uncertainty, supported by robust domestic consumption and government spending, a report said on Wednesday.

A report from SBI Capital Market indicated that the Indian markets remained resilient, though the aggressive tariff regime of the United States has become a significant issue globally.

"India remained surprisingly insulated in Q1, clocking an above-par GDP growth. There is recognition that, amidst global headwinds from high tariffs imposed on India, a domestic consumption stimulus is in order. The GST reform is a welcome step in this regard," the report said.

A US appeals court ruling had deemed the tariffs unconstitutional, escalating the issue to the Supreme Court. “Until clarity emerges, trade-policy volatility remains elevated, with key pressure points in autos, electronics, and textiles,” the report added.

Indian exporters encounter reciprocal tariffs reaching as high as 50 per cent, which includes a 25 per cent tariff linked to Russian crude purchases, increasing cost pressures. The report indicated that uncertainty is impacting trade flows and margins.

“Despite a weaker US dollar, the Indian rupee hit a record low, down about 5 per cent year-on-year, with the Reserve Bank of India (RBI) limiting intervention and unwinding forward positions to preserve reserves while letting depreciation aid exports,” the report said.

“Capital flows remain muted, while the current account remains manageable despite weaker merchandise exports from tariff pressures,” it added. India’s Q1 GDP growth reached 7.8 per cent, and the government’s decision to simplify the GST structure is set to release about Rs50,000 crore into the economy, boosting domestic consumption, the research wing said.