(MENAFN- KNN India) New Delhi, Aug 5 (KNN) Moody's Ratings has cautioned that India's ability to grow its manufacturing sector-especially in high-value industries like electronics-could be hampered by restricted access to the U.S. market, following the latest tariff measures announced by President Donald Trump, according to a PTI report.

However, the ratings agency expects India's domestic demand to remain resilient despite these external headwinds.

Beginning August 7 (9:30 a.m. IST), a new 25 percent import duty will apply to Indian goods entering the US, in addition to existing standard tariffs.

Trump has also signalled a separate penalty on Indian imports tied to the country's trade relationship with Russia, although details on this additional levy are still pending.

Christian de Guzman, Senior Vice President, Moody's Ratings, noted that the newly revised tariff rates on Indian exports are substantially higher than those imposed on other Asia-Pacific (APAC) economies, which generally face duties in the 15–20 percent range.

“Curtailed access to the largest economy globally diminishes prospects for India's ambitions to develop its manufacturing sector, particularly in higher value-added sectors such as electronics,” Guzman said.

He added that the elevated tariffs place India at a disadvantage as it seeks to attract trade and investment flows redirected from China, which is currently subject to even steeper US tariff measures.

The United States is India's largest trading partner, accounting for roughly 18 percent of its total merchandise exports in 2024.

Bilateral trade negotiations are ongoing, but the USD 80 billion worth of Indian goods exported to the US span key sectors that are also central to India's broader export profile.

Despite the external challenges, Moody's expects India's economy to remain relatively insulated due to its lower dependence on trade compared to other major APAC economies.

Guzman pointed out that the country's services sector continues to show strong potential.

“The favourable outlook for India's services sector, whose scope and scale are unrivalled in the region, remains intact, as associated services exports do not appear to be a major point of contention in bilateral relations with the US,” he said.

(KNN Bureau)

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