India is said to be expecting to lose a competitive advantage in about $64 billion worth of goods exported to the U.S. due to President Donald Trump's 25% tariff and an assumed 10% penalty for buying Russian oil, four sources told Reuters, citing an internal assessment report by the government.
India faces its most serious diplomatic crisis with the U.S. in years after Trump imposed the highest tariffs among Asian peers on goods imported from India, even before any penalty.
A relatively low share of exports in India's $4 trillion economy is seen limiting the direct impact on growth to 40 basis points. The Reserve Bank of India (RBI) left its gross domestic product (GDP) growth forecast for the current April-March financial year unchanged at 6.5% and held rates steady on Wednesday despite the uncertainty created by tariff hikes.
The trade impact estimates were prepared by the Indian government after Trump announced the unexpectedly high tariff for Indian goods, along with the unspecified penalty. The Indian government, in its assessment report, has assumed a 10% penalty for buying Russian oil, taking the tariff to 35%, the four Indian government sources told Reuters.
They declined to be identified because they were not authorized to speak to the media.
India's trade ministry did not immediately respond to a request for comment.
Trump said on Wednesday his administration will decide on the penalty for buying Russian oil after the outcome of U.S. efforts to seek a last-minute breakthrough in the Ukraine war. U.S. envoy Steve Witkoff is in Moscow, two days before the expiry of a deadline set by Trump for Russia to agree to peace or face new sanctions.
The impact of the tariff and possible penalty will be on nearly $64 billion worth of India’s exports to the U.S that account for about 80% of total exports to the country, and it will lead to "potential export losses" due to price disadvantages, the four sources said.
The internal assessment report is the government's initial estimate and will change as the quantum of the tariff imposed by Trump becomes clear, all four sources said.
India exported goods estimated at around $81 billion in 2024 to the U.S., including garments, pharmaceuticals, gems and jewellery, and petrochemicals, according to government data. The South Asian nation's goods exports to the U.S. constituted 2% of GDP in 2024.
Its total goods exports globally were at $443 billion in 2024.
The proposed tariffs on India's high-value exports face "erosion of price competitiveness encountering intensified rivalry from countries subject to lower duties," two sources said, citing the internal assessment.
India's National Security Adviser Ajit Doval is in Russia on a scheduled visit and is expected to discuss India's purchases of Russian oil in the wake of Trump's pressure on India to stop buying Russian crude, according to a government source.
His visit will be followed by Foreign Minister Subrahmanyam Jaishankar in the weeks to come, amid India's attempts to placate Washington's concerns while balancing historical ties with Moscow.
Doval is expected to discuss India's defense collaboration with Russia, including getting faster access to the pending units of the S-400 air defense system and President Vladimir Putin's visit to India.
India's foreign ministry did not immediately respond to a request for comment.
