Fitch Ratings Warns of Potential US Tariff Impact on Indian Corporates

Fitch Ratings reveals that Indian corporates face limited direct exposure to US tariffs, though further announcements could affect pharmaceuticals. With the highest tariff rate in Asia, second-order effects are a growing concern. A US-India trade deal may mitigate these risks, benefiting various sectors.

Fitch Ratings recently highlighted that while Indian corporations currently bear minimal direct consequences from US tariffs, potential future tariff impositions could adversely affect sectors like pharmaceuticals, which are currently unaffected. This caution is prompted by the US's imposition of a substantial 25 percent reciprocal tariff on Indian imports, effective from August 2025, with an additional levy to follow in late August as a penalty associated with Russian oil imports.

This means India faces the highest tariff rates among Asian countries regarding exports to the US. Existing tariffs also pose a rising risk of second-order effects, as reported by Fitch. The rating agency suggests that a potential US-India trade agreement could alleviate these risks, thereby shielding sensitive sectors from adverse impacts.

Notably, Russian crude constitutes 30-40 percent of the crude imports for Indian oil marketing companies, supporting their profitability due to discounted pricing. The ratings agency continues to predict minimal direct tariff impacts on Indian IT services and domestically-focused industries, although sustained tariffs might affect overall economic growth projections, leading to broader operational challenges for Indian enterprises.