Imposition of the additional 25 per cent tariffs on Indian goods because of the country's purchase of Russian oil will make it "unviable" for India Inc to export to the US, a report said on Tuesday.
In a credit alert, domestic rating agency Crisil said earnings of companies in sectors such as diamond polishing, shrimp, home textiles, and carpets are at the risk of getting impacted.
It also said all eyes will now be on the bilateral trade agreement and what both countries achieve as a part of that.
"Additional 25 per cent tariff to make exports to US unviable for India Inc," the rating agency said, adding that other sectors, including ready-made garments (RMG), chemicals, agrochemicals, capital goods, and solar panel manufacturing, which have sizable trade exposure to the US, also stand getting impacted.
The extent of impact will vary depending on exposure, ability to pass on incremental costs to customers, and relative tariff disadvantage versus competing nations, it added.
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, along with any bilateral treaty between India and the US, it said.
The credit impact on the sectors can be mitigated courtesy strong corporate balance sheets, potential bilateral trade agreements with other countries and the possibility of support from the Indian government.
In FY25, the US accounted for a fifth of India's merchandise exports and 2 per cent of the overall GDP in the country, it said.
Diamond polishing, shrimp and home textiles may see sales volume decline due to high reliance on US trade and a rise in costs due to partial absorption of tariffs, ultimately affecting their earnings, the agency said.
The US accounts for a fourth of diamond polishers' revenues, it said, adding that tariffs aggravate it because the demand for natural diamonds was already tepid.
In the case of shrimp exporters, the US accounts for nearly half of revenue and India is now the highest taxed country exporting the commodity to the US, it said, adding that it will be a challenge to compete with Ecuador enjoying lower tariffs.
All the other sectors have a high reliance on the US for its topline and will be facing varying impacts, the agency said, stating that it will continue to closely monitor the situation and evaluate the impact on the credit risk profiles of its rated companies.
In a credit alert, domestic rating agency Crisil said earnings of companies in sectors such as diamond polishing, shrimp, home textiles, and carpets are at the risk of getting impacted.
It also said all eyes will now be on the bilateral trade agreement and what both countries achieve as a part of that.
"Additional 25 per cent tariff to make exports to US unviable for India Inc," the rating agency said, adding that other sectors, including ready-made garments (RMG), chemicals, agrochemicals, capital goods, and solar panel manufacturing, which have sizable trade exposure to the US, also stand getting impacted.
The extent of impact will vary depending on exposure, ability to pass on incremental costs to customers, and relative tariff disadvantage versus competing nations, it added.
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, along with any bilateral treaty between India and the US, it said.
The credit impact on the sectors can be mitigated courtesy strong corporate balance sheets, potential bilateral trade agreements with other countries and the possibility of support from the Indian government.
In FY25, the US accounted for a fifth of India's merchandise exports and 2 per cent of the overall GDP in the country, it said.
Diamond polishing, shrimp and home textiles may see sales volume decline due to high reliance on US trade and a rise in costs due to partial absorption of tariffs, ultimately affecting their earnings, the agency said.
The US accounts for a fourth of diamond polishers' revenues, it said, adding that tariffs aggravate it because the demand for natural diamonds was already tepid.
In the case of shrimp exporters, the US accounts for nearly half of revenue and India is now the highest taxed country exporting the commodity to the US, it said, adding that it will be a challenge to compete with Ecuador enjoying lower tariffs.
All the other sectors have a high reliance on the US for its topline and will be facing varying impacts, the agency said, stating that it will continue to closely monitor the situation and evaluate the impact on the credit risk profiles of its rated companies.
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