Farooq Tantary CNI

India’s economy could take a hit in 2026 if the United States continues to impose a 25% tariff on its exports beyond September next year, warns a new report by S&P Market Intelligence.

The report, released on Friday, says India’s GDP for FY2026 could fall below the current projection of 6.2%, mainly due to unresolved trade issues between the two nations. In comparison, India’s GDP grew by 6.5% in FY2025.

The main sticking point? India’s refusal to give the US market access to its agriculture and dairy sectors—two sensitive areas that directly affect millions of Indian farmers and are crucial during elections. S&P notes that it’s unlikely India will lower tariffs on American crops like soy, corn, wheat, and rice.

S&P also highlighted concerns over US Section 232, which includes national security-related tariffs. Indian exports of electronics and pharmaceuticals—worth 12.3% and 17.8% of India’s total exports to the US—may face tougher competition, as the US has already offered better terms to the European Union.

Adding to the complications is India’s ongoing import of Russian oil and defence equipment. Although India is open to buying more crude oil from the US, it’s not likely to do so just to meet American demands. Instead, India is more interested in increasing imports of LNG (liquefied natural gas) from the US, which could help balance trade between the two countries. In 2024, India enjoyed a $45.7 billion trade surplus with the US.

Former President Donald Trump has also warned of penalties if India continues dealing with Russia, but no clear action has been announced yet.

In short, unless a trade deal is worked out soon, India could face slower economic growth and tougher competition in key export sectors.