India’s trade surplus with the United States is expected to cross $90 billion annually, according to a report by SBI research, after the US reduced its tariff on Indian goods to 18%. India intends to purchase $500 billion US products in five years.
According to SBI Research, the interim trade agreement places India in a strong strategic position as the deal could add around $45 billion annually to India’s trade surplus with the US and lift India’s GDP by nearly 1.1%.
Here are 3 key reasons why SBI research believes that the decline in tariff is a golden opportunity for Indian exporters to increase their market share in US.
#1. Trade surplus with US may cross $90 billion after tariff cut
The SBI research highlighted that India’s surplus with the US was already $40.9 billion in FY25 and $26 billion in FY26 (April-December), with the recent tariff decline the additional export push is likely to drive the surplus beyond $ 90 billion annually.
The report also pointed out that Indian exports to the US remained resilient even when tariffs were as high as 50%.
“Traction in exports could only be an upside post the deal as Indian exports even with 50% tariff has almost matched a hypothetical no tariff scenario,” SBI research said.
#2. India to tap $3 trillion US import gap, exports may jump $100 billion
The report by SBI Research noted that, India currently meets only about 3% of total US import demand, leaving a massive demand-supply gap of nearly $3 trillion.
With lower tariffs, Indian exports to the US could rise by more than $100 billion annually. Electrical machinery, mechanical machinery, pharmaceuticals, vehicles and auto parts, and gems and jewellery are expected to lead this growth.
As per the report, Indian exporters may increase their exports of the top 15 items to the US by around $97 billion in a year. Including the remaining items, the export potential may easily cross the $100 billion mark annually.
“India’s Trade surplus with the US may thus cross $90 billion annually…….As per our preliminary estimates, Indian exporters may increase their exports of the top 15 items to the US by approx. $97 billion in a year,” SBI research noted.
#3. India gains tariff advantage over Asian peers
SBI research report also highlighted that a reduced tariff of 18% gives India a clear competitive edge over key Asian peers. India now enjoys lower tariff than countries such as Vietnam- one of the major trading partner of US- Bangladesh, Indonesia and Thailand.
China on the other hand continues to face much higher tariffs of 37%.
Multiple drivers behind India’s export expansion
A huge demand–supply gap in the US market, a competitive edge over other Asian countries, and an already healthy trade surplus with the US are provides room for Indian exports to expand.
Along with these, the SBI report noted, that zero or reduce tariffs on all US industrial goods and a wide range of US food and agricultural products by India will also help India save around $3 billion per year in foreign exchange reserves.
“An indirect impact in the form of savings in forex reserves due to zero/reduced import duty from US is around $3.0 billion,” the report noted.