ICRA (Investment Information and Credit Rating Agency of India) has revised India’s GDP growth forecast for FY2026 to 6.5 per cent, up from its earlier projection of 6 per cent, citing the impact of Goods and Services Tax (GST) reforms that are expected to cushion the economy against the effects of steep US import tariffs.
The credit rating agency said on Wednesday that proactive steps by industries, including rerouting trade and diversifying markets, are helping India absorb the tariff shock. However, it cautioned that high tariff burdens could continue to weigh on profitability and demand across several sectors.
The report noted that India exports over 140 product categories to the United States, making the market vital for industries ranging from auto components to seafood. The US has imposed cumulative tariffs of about 50 per cent on Indian imports, significantly higher than those levied on exporters from China, Vietnam, Bangladesh and Japan.
While these duties are expected to squeeze margins and demand in FY2026, ICRA said industry strategies and policy support are helping contain immediate fallout. Exporters are adding value to products, seeking alternative markets, and routing trade through tariff-exempt regions such as Mexico, Europe and Dubai.
According to the report, several auto exporters are mitigating the impact by enhancing value addition and leveraging subsidiaries in tariff-exempt geographies. Most companies currently report minimal immediate impact, supported by cost pass-through measures and strong customer retention.
In the metals sector, ICRA found no significant disruption in volumes despite the tariffs. Companies have managed to pass on the entire duty burden to US buyers, aided by the limited domestic manufacturing capacity in specialised products within the US.
