India-US Trade Pact: Export Boost Tempered by Energy and Metals Concerns
A new analysis from investment bank SBI Capital Markets (SBICaps) presents a nuanced view of the recently finalized India–US interim trade agreement. While the framework is broadly positive for the Indian economy, the report highlights potential upward pressure on the nation's energy import costs and significant impacts on specific metal sectors.
Export Sectors Poised for Major Gains
The report underscores substantial benefits for several export-oriented industries. Under the agreement's first phase, India is set to gain zero-duty access for goods valued at approximately $44 billion. This represents nearly half of India's total merchandise exports to the United States.
Key sectors identified for duty-free access include:
- Textiles and apparel
- Leather and leather goods
- Plastics and rubber products
- Organic chemicals
- Seafood and marine products
Commerce and Industry Minister Piyush Goyal emphasized that India has secured carefully crafted exemption lines for sensitive domestic products. These protected items include dairy products, soyameal, lentils, various cereals and millets, fruits such as bananas and strawberries, green peas, honey, ethanol for fuel blending, and genetically modified foods.
Energy Import Basket and Metals Face Headwinds
Despite the export advantages, the SBICaps report cautions that the full impact on India's energy import costs and specific metal items remains to be fully realized. The concern emerges amid US claims that India has committed to reducing purchases of Russian oil while increasing imports from the United States and Venezuela.
Experts note that diversion from discounted Russian crude—currently available at $8-12 per barrel below market rates—could elevate India's overall crude import expenses. Ratings agency Icra Ltd estimates that replacing Russian crude with market-priced alternatives would increase India's import bill by less than 2%, a manageable but notable increment.
Regarding metals, sector-specific tariffs imposed under US Section 232 will continue at 50% for steel, aluminum, and copper. In the auto components sector, the existing 25% tariff will be eliminated on half the import volume, while the remaining half will continue to attract the same duty.
Historical Context and Tariff Reductions
The report provides important historical context, noting that by the end of 2025, India faced some of the highest US tariffs among emerging markets, averaging about 50%. This landscape changed significantly in 2026 with India signing comprehensive trade agreements with both the United States and the European Union.
Under the new framework, the United States has agreed to reduce tariffs to 18% on most items, including the removal of the punitive 25% levy previously imposed on Russian oil imports by India. This represents a substantial improvement in market access conditions for Indian exporters.
Economic Growth Projections Revised Upward
In a related development, Goldman Sachs Research revised its 2026 GDP growth estimate for India upward by 20 basis points to 6.9%. The financial institution attributed this adjustment to the reduced tariffs on Indian exports under the India-US interim trade agreement framework, which is expected to provide a measurable boost to the country's economic expansion.
Broader Economic Considerations
The SBI Capital Markets analysis also addresses broader fiscal and investment considerations. The report acknowledges that further measures are necessary to bolster the manufacturing segment, which has shown promising growth indicators in recent quarters.
Notably, after a period of reduced activity, capital expenditure allocations to both roads and railways received a healthy boost in FY27. The report observes: "The effective capex has grown at a sharper pace versus union capex, indicating that while the Union is willing to shoulder responsibility for core sectors, it expects States and private entities to assume greater responsibility for capital expenditure in other sectors."
This balanced approach to infrastructure investment suggests a strategic division of financial responsibilities between central and state governments alongside private sector participation.
