Representational image of U.S. President Donald Trump
| Photo Credit: Reuters
As tariff action by U.S. President Donald Trump looms large, the State Bank of India (SBI) in a special report said that India however would stand to gain in an increasingly uncertain world of tariffs.
“Trends indicate that the jump in the U.S. economy post-COVID may have been an outlier as a result of policy extravaganza. Long trends indicate a possible downturn in U.S. economy GDP growth along with a slowdown in U.S. exports and consumption,” SBI said in the report.
“The overall value add is showing a declining trend with shrinking Total Factor Productivity (TFP) growth. High U.S. wages could hold back new investment. Net savings to GDP is also at the lowest level since 2011, the second lowest since 1951,” it said.
“The U.S. debt to GDP ratio shows a secular rising trend… ironically… the U.S. currency showing strength show cyclical trends with falling peaks,” it further said.
”If the structural adjustment gains traction, then only the U.S. potential GDP trend can see an upward shift. The crowding in of the private sector that follows along with technical progress can add to growth prospects. However, this adjustment will have short-term costs and has lots of ifs and buts,” SBI report.
According to SBI report, the reciprocal tariff may not impact India much.
The decline in exports from India to the U.S. could be in the range of 3-3.5% post reciprocal tariffs, if any, it said.
“We estimated the decline in exports in the range of 3-3.5% which again should be negated through higher export goals across both manufacturing and services fronts, as India has diversified its exports kitty, pitched value addition, exploring alternate areas and works on new routes that transcend from Europe to the USA via the Middle-East, redrawing new supply chain algorithms,” it said.
Stating that India has signed 13 Free Trade Agreements (FTAs) in the last five years with its trading partners like Mauritius, UAE, Australia, SBI said these FTAs covering a wide array of topics, such as tariff reduction impacting the entire manufacturing and the agricultural sectors; rules on services trade; digital issues such as data localization; intellectual property rights would help.
“India is negotiating FTAs with the UK, Canada, and the EU, targeting sectors like services, digital trade, and sustainable development. The FTA with the UK alone is expected to increase bilateral trade by $15 billion by 2030,” it said.
Future FTAs will likely focus on enhancing digital trade, with projections indicating that the digital economy could add $1 trillion to India’s GDP by 2025, it added.
Stating that tech supremacy was driving the U.S. dominance, it said a ‘Deep Seek’ moment could unsettle much of it.
Published – March 17, 2025 03:23 pm IST
