Even as India and the United States move closer to concluding a long-anticipated trade agreement, a new report by SBI Research suggests that India has significant room to grow its exports, regardless of whether the deal delivers all it promises.
“We believe that 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 notes.
The note comes as US President Donald Trump signaled that BRICS nations, including India, will “pretty soon” face a 10% tariff under his renewed push for reciprocal trade.
Titled “Tariff Truce on the Horizon: India, USA Set to Seal the Trade Deal”, the report highlights that recent tariff hikes by the US on 23 countries have reshaped global trade dynamics. India, relatively less affected by the new tariff regime, is now well-positioned to capture market share in key sectors such as chemicals, apparel, agricultural goods, and processed foods, both in the US and in tariff-impacted Asian markets.
Chemicals: India's competitive edge
The report notes that India has a revealed comparative advantage (RCA) in chemicals and pharmaceuticals, two segments where countries like China and Singapore currently dominate US imports. With China now facing higher reciprocal tariffs, India has an opportunity to increase its market share.
“If India can capture even 2% of the US chemical import share currently held by China and Singapore, it could add 0.2% to its GDP,” the report estimates. An additional 1% gain from countries like Japan, South Korea, and Malaysia could contribute another 0.1%.
To maximise this opportunity, the report recommends India negotiate for tariffs below 25%, bringing them closer to Singapore’s rate and enhancing price competitiveness.
Apparel: Scope for market share gains
India currently contributes about 6% of US apparel imports. With new US tariffs hitting Bangladesh, Cambodia, and Indonesia, countries that previously enjoyed cost advantages, the report sees a window for India to expand its share.
“Capturing an additional 5% share in US apparel imports could potentially add 0.1% to India’s GDP,” the research states.
This would require improvements in cost efficiency, lead times, and possibly PLI-like support for scale manufacturers in textiles.
New opportunities in Asia
Interestingly, the report notes that India can also benefit from the tariff hikes imposed by the US on Asian countries by expanding exports to those very nations. Products with high potential include:
These markets are likely to seek alternate sourcing as their access to US goods narrows.
Non-tariff opportunities in pharma and AYUSH
The report also identifies non-tariff barriers (NTBs) as a critical area in trade negotiations. It estimates that removal of NTBs in sectors such as generic pharmaceuticals, Ayush products, and processed organic food could add $1–2 billion in Indian exports.
“Currently, regulatory bottlenecks limit exports of Indian generics and traditional wellness products. If addressed, exports in these segments could grow significantly,” SBI Research notes.
India-ASEAN FTA
A significant portion of the report focuses on India’s growing trade deficit with ASEAN nations, which reached $45 billion in FY25, up from $16 billion in FY21. The report flags "weak rules of origin" in the ASEAN-India Free Trade Agreement (AIFTA) as a key reason for the dumping of Chinese goods via ASEAN countries.
“India must work to remove tariff distortions and fix loopholes that are eroding its trade position,” the report warns.
Even if India’s mini trade deal with the US falls short of expectations or involves some concessions, the broader tariff realignment across global markets offers India a chance to reposition itself as a preferred export partner.
As SBI Research puts it, “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.”
“We believe that 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 notes.
The note comes as US President Donald Trump signaled that BRICS nations, including India, will “pretty soon” face a 10% tariff under his renewed push for reciprocal trade.
Titled “Tariff Truce on the Horizon: India, USA Set to Seal the Trade Deal”, the report highlights that recent tariff hikes by the US on 23 countries have reshaped global trade dynamics. India, relatively less affected by the new tariff regime, is now well-positioned to capture market share in key sectors such as chemicals, apparel, agricultural goods, and processed foods, both in the US and in tariff-impacted Asian markets.
Chemicals: India's competitive edge
The report notes that India has a revealed comparative advantage (RCA) in chemicals and pharmaceuticals, two segments where countries like China and Singapore currently dominate US imports. With China now facing higher reciprocal tariffs, India has an opportunity to increase its market share.
“If India can capture even 2% of the US chemical import share currently held by China and Singapore, it could add 0.2% to its GDP,” the report estimates. An additional 1% gain from countries like Japan, South Korea, and Malaysia could contribute another 0.1%.
To maximise this opportunity, the report recommends India negotiate for tariffs below 25%, bringing them closer to Singapore’s rate and enhancing price competitiveness.
Apparel: Scope for market share gains
India currently contributes about 6% of US apparel imports. With new US tariffs hitting Bangladesh, Cambodia, and Indonesia, countries that previously enjoyed cost advantages, the report sees a window for India to expand its share.
“Capturing an additional 5% share in US apparel imports could potentially add 0.1% to India’s GDP,” the research states.
This would require improvements in cost efficiency, lead times, and possibly PLI-like support for scale manufacturers in textiles.
New opportunities in Asia
Interestingly, the report notes that India can also benefit from the tariff hikes imposed by the US on Asian countries by expanding exports to those very nations. Products with high potential include:
- Agricultural goods
- Livestock and processed foods
- Waste and scrap (especially metal scrap)
- Animal and vegetable processed products
These markets are likely to seek alternate sourcing as their access to US goods narrows.
Non-tariff opportunities in pharma and AYUSH
The report also identifies non-tariff barriers (NTBs) as a critical area in trade negotiations. It estimates that removal of NTBs in sectors such as generic pharmaceuticals, Ayush products, and processed organic food could add $1–2 billion in Indian exports.
“Currently, regulatory bottlenecks limit exports of Indian generics and traditional wellness products. If addressed, exports in these segments could grow significantly,” SBI Research notes.
India-ASEAN FTA
A significant portion of the report focuses on India’s growing trade deficit with ASEAN nations, which reached $45 billion in FY25, up from $16 billion in FY21. The report flags "weak rules of origin" in the ASEAN-India Free Trade Agreement (AIFTA) as a key reason for the dumping of Chinese goods via ASEAN countries.
“India must work to remove tariff distortions and fix loopholes that are eroding its trade position,” the report warns.
Even if India’s mini trade deal with the US falls short of expectations or involves some concessions, the broader tariff realignment across global markets offers India a chance to reposition itself as a preferred export partner.
As SBI Research puts it, “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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