India’s diamond polishing, shrimp, home textile, and carpet industries are likely to take the hardest revenue hit from the United States’ latest tariff hike, which could render exports to America unviable for many Indian companies, Crisil Ratings has warned.
The US has imposed a 25% tariff on Indian goods as a penalty for importing Russian crude oil, effective from August 27, in addition to an existing 25% reciprocal tariff. The impact will vary across sectors depending on their US market exposure, pricing power, and competitive position relative to other exporting nations, Crisil said in a credit alert.
The rating agency also flagged a possible “second-order effect” from slowing US demand and shifting global trade patterns, as divergent tariff regimes alter supply chains.
According to Crisil, the US accounts for around 20% of India’s merchandise exports. The sectors most exposed to the new tariffs include diamond polishing, shrimp, home textiles, carpets, ready-made garments, chemicals, agrochemicals, capital goods, and solar panel manufacturing.
Diamond polishing is particularly vulnerable, with about 25% of sectoral revenue in 2024-25 coming from US exports. The new duties, coupled with already weak demand for natural diamonds in America, threaten to erode revenues and compress already thin operating margins. US retailers have shown little willingness to absorb higher costs, which could slow inventory turnover and delay payments, stretching working capital cycles.
Shrimp exporters, who derive nearly half their revenue from the US, face some of the highest tariff burdens globally, as countervailing and anti-dumping duties are already in place. Competition from lower-tariff suppliers such as Ecuador could further depress export volumes, Crisil said.
In home textiles and carpets, the discretionary nature of purchases limits retailers’ ability to pass on higher costs. The US accounts for about 60% of India’s home textile exports and 50% of carpet shipments, meaning sharp revenue and profit declines are likely.
Other sectors also face headwinds. Ready-made garments (10-15% US revenue) risk losing competitiveness against Chinese and Vietnamese exporters; agrochemical exporters (11-12% US revenue) face tough Chinese competition in alternative markets; and the specialty chemicals sector (5% US revenue) is still recovering from profitability pressures.
Capital goods manufacturers (15% US revenue) may be able to partially absorb higher costs but could see new orders hit by competition from Mexico and others. Solar panel makers (10-12% US revenue) may find relief in strong domestic demand, even as exports suffer.
Pharmaceuticals and smartphones, despite large US trade volumes, remain exempt from the new tariffs, while duties on steel, aluminium, and some auto components are unchanged.
Crisil said strong corporate balance sheets, potential bilateral trade deals with other countries, and possible Indian government support for affected industries could cushion some of the blow. However, the wider implications of the US tariffs — from inflation-driven drops in discretionary spending to competing countries redirecting exports towards India — may continue to unsettle trade flows in the near term.
(By arrangement with livemint.com)
