US-India Tariff Deal Boosts Labor-Intensive Exports

Moody's reported a US tariff reduction on Indian goods, boosting India's export growth, especially in labor-intensive sectors like gems, textiles, and apparel. The deal reduces tariffs from 25% to 18%, impacting India’s major export market. Pharmaceuticals remain unaffected, and non-Russian oil purchases pose potential economic challenges.

The reduction of the US tariff rate on most Indian goods is poised to give a significant boost to India's export market, experts say. Moody's highlighted that this move, particularly beneficial for labor-intensive sectors like gems, jewellery, textiles, and apparel, could lead to growth in these top export areas.

Under a new trade agreement, the United States will decrease reciprocal tariffs on Indian goods to 18% from the current 25%. This announcement came following a conversation between US President Donald Trump and Indian Prime Minister Narendra Modi. The change is expected to stimulate India's export figures to its largest market.

Pharmaceuticals and consumer electronics, however, are unlikely to see much change as they were not subject to the previously high tariffs. Moody's also noted that while India's shift from purchasing Russian crude oil continues, a complete transition could potentially raise oil prices and inflation, impacting economic growth.

(With inputs from agencies.)