New Delhi: S&P Global Ratings on Tuesday said India’s long-term growth prospects remain intact despite the imposition of steep US tariffs, as the government continues to pursue reforms, fiscal discipline and measures to raise living standards.
After nearly two decades, S&P upgraded India’s sovereign credit rating to ‘BBB’ with a stable outlook, citing strong economic momentum, commitment to fiscal consolidation and supportive monetary policies to contain inflation.
“We expect India’s growth to average 6.8 per cent annually over the next three years,” said YeeFarn Phua, Director at S&P Global Ratings, during a webinar.
He added that improving infrastructure and connectivity could unlock higher growth by easing supply-side bottlenecks.
Phua noted that India has been among the fastest-growing and best-performing economies globally, consistently outpacing regional peers in the past 3–4 years.
On the impact of higher US tariffs, Vishrut Rana, S&P Asia-Pacific Economist, said India’s relatively low trade dependence offers a buffer. With 85 per cent of GDP driven by domestic demand and only 15 per cent reliant on external trade, the economy is less exposed to tariff shocks.
The US has imposed a 25 per cent duty on Indian goods from August 7, with another 25 per cent scheduled from August 27, effectively doubling tariffs to 50 per cent. Rana, however, pointed out that not all Indian exports are covered, and sectors such as pharmaceuticals and consumer electronics enjoy exemptions.
“There could be some short-term sentiment effects, but medium-term growth will hinge on reforms, infrastructure and a supportive business environment,” he said.
Phua stressed that such external disruptions would not distract the government from its long-term agenda. “By and large, the government is staying on course—focused on reforms, fiscal consolidation and raising the standard of living,” he said.
Asked about the overall tariff impact, Phua said exports to the US account for just 1
per cent of India’s GDP, making the long-term effect negligible. “Even though tariffs are
high, we believe India’s growth story remains fundamentally strong,” he added.
S&P also commented on the government’s proposed two-rate GST structure, which is likely to be discussed at a key Centre-state meeting this week.
The plan aims to reduce the current four slabs—5, 12, 18 and 28 per cent—to just 5 and 18 per cent, with a special 40 per cent rate for select items.
Phua said the reform could simplify compliance, cut disputes, and eventually boost fiscal revenues. “Though the effective rate may be lower, easier implementation and accounting could improve collections in the long run,” he said.
According to the proposal, 99 per cent of items in the 12 per cent slab would shift to 5 per cent, while 90 per cent of those in the 28 per cent slab would move to 18 per cent, reducing litigation, evasion and duty inversion.