(MENAFN- IANS) New Delhi, Sep 17 (IANS) India's economy is set to grow faster at 6.5 per cent in FY2026, up from the previous expectation of 6 per cent, due to GST reforms that will cushion the blow from steep US import tariffs, a report said on Wednesday.

Credit rating agency ICRA also said in the report that proactive strategies from industries, trade rerouting and geographic diversification could help India weather the tariff shock.

The ratings agency, however, maintained that the high tariff burden is likely to weigh on sectoral profitability and demand across several industries.

India ships more than 140 product categories to the US, making the market critical for sectors ranging from auto components to seafood, the report said.

While the high US tariffs are expected to pressure margins and demand in FY2026, industry responses and policy support are helping limit immediate damage, the report noted.

Exporters are diversifying markets, adding value to products, and routing trade through tariff-exempt geographies such as Mexico, Europe, and Dubai.

The United States has imposed a cumulative 50 per cent tariff on Indian imports, far exceeding rates applied to exporters from China, Vietnam, Bangladesh, and Japan.

While some industries appear capable of mitigating the impact, others face pronounced challenges that may weigh on earnings through FY2026, it said.

Several auto exporters are mitigating the impact by diversifying markets, enhancing value addition, and leveraging subsidiaries in tariff-exempt geographies such as Mexico and Europe, the report said.

Most companies report minimal immediate impact, supported by cost pass-through strategies and customer stickiness, the report added.

In the metals sector, no significant volume disruption was observed despite tariffs. Companies have managed a full pass-through of duties to US buyers, aided by limited domestic US manufacturing capabilities in specialised products, it noted.

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