Knock-on impact of US tariffs poses economic challenges, says Finance Ministry

The immediate impact of U.S. tariffs on Indian exports appears limited, but the ripple effects on the economy pose challenges that must be addressed, India's finance ministry said in its July monthly economic review, released on Wednesday.

The report by the finance ministry said ongoing India-US trade negotiations "will be crucial".

India is pursuing a diversified trade strategy, which includes its recent trade deal with Britain and some European nations. It also has ongoing talks with New Zealand and the European Union, among others, to sustain its "resilient trade performance".

However, "these initiatives will take time to show results and may not fully address the shortfall in exports to the United States that may arise if the current tariff rates on India persist."

U.S. President Donald Trump's doubling of tariffs on goods from India to as much as 50% took effect as scheduled on Wednesday, dealing a serious blow to ties between the two countries that became strategic partners after the turn of this century.

Turning to India, the report said a recent sovereign rating upgrade by S&P, complemented by sweeping tax reforms and plans to simplify regulations, would reduce borrowing costs and attract greater foreign capital inflows.