New Delhi, Aug 12, 2025
Strong corporate balance sheets, potential bilateral trade agreements with other countries and the possibility of support from the Indian government for the impacted sectors could mitigate the credit impact to some extent arising due to increased US tariffs on India, a Crisil report said on Tuesday.
Any support measures from the Indian government to safeguard the tariff-impacted sectors will play an important role. Plus, the tariffs come at a time when corporate balance sheets have strengthened significantly, which could cushion the credit impact, the report mentioned.
The imposition of 25 per cent tariff on import of goods from India into the US will have a significant impact on the earnings of companies in sectors such as diamond polishing, shrimp, home textiles and carpets.
Additionally, the move to impose an additional 25 per cent tariff with effect from August 27 as a penalty for importing crude oil from Russia will make Indian exports to the US unviable for the aforesaid as well as other sectors including ready-made garments (RMG), chemicals, agrochemicals, capital goods and solar panel manufacturing, which have sizable trade exposure to the US.
“The extent of impact will vary depending on exposure, ability to pass on incremental costs to customers, and relative tariff disadvantage versus competing nations. A potential second-order impact, including a slowdown in US demand and disparate tariffs across nations that could alter trade dynamics globally, also warrants close monitoring. Any potential trade agreement between the two nations in the coming days will bear watching,” the Crisil report noted.
Last fiscal, the US accounted for 20 per cent of India’s merchandise exports and 2 per cent of its overall GDP.
For sectors such as ready-made garments (RMG), agrochemicals, specialty chemicals, capital goods, etc., the impact of the 25 per cent reciprocal tariff is likely to be more manageable, considering moderate exposure to the US (5-20 per cent of overall revenue) and limited tariff disadvantage that will allow companies to partly pass on the impact to customers.
However, the additional 25 per cent tariff will have an adverse impact on all the sectors.
For India’s solar panel manufacturing industry, volume growth and operating profitability are unlikely to be significantly impacted, as exports to the US account for only 10-12 per cent of overall sales volume. This share is expected to decline this fiscal, driven by growing domestic demand.
Additionally, while certain sectors, such as pharmaceuticals and smartphones, have substantial trade exposure to the US, they are currently exempt from tariffs. Meanwhile, the tariff rates for other sectors, including steel, aluminum and certain automotive components, remain unchanged at present. Any modifications to these rates will be closely tracked, said the global credit rating agency.(Agency)
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