Mumbai: India’s prospects of becoming a global manufacturing hub may diminish due to a decline in goods exports to the United States, according to a report by the rating agency Moody’s. However, strong domestic demand is expected to cushion the impact of external pressures.

The U.S. has imposed a 25% duty on Indian goods, effective from August 7. Additionally, a penalty has been announced, though its specifics are yet to be clarified.

Compared to major exporting nations in the Asia-Pacific (APAC) region, India faces higher tariff rates. While APAC countries generally encounter tariffs ranging from 15% to 20%, India is subject to significantly steeper duties.

Moody’s report highlights that a slowdown in global demand for goods, particularly in advanced economies, could adversely affect India’s ambition to emerge as a key manufacturing center in value-added sectors like electronics. The report also notes that India’s efforts to capture market share from China may falter due to these high tariffs.

Currently, India and the U.S. are engaged in bilateral trade negotiations. The U.S. remains India’s largest trading partner, accounting for 18% of the country’s goods exports in 2024.

In the last fiscal year, India exported goods worth $86 billion to the U.S.

Compared to other APAC nations, India’s economy is less dependent on exports, suggesting that robust domestic demand will help the country remain resilient amid external challenges.

Furthermore, the outlook for India’s services sector remains positive. No major disputes have surfaced in service-related exports during trade talks with the U.S., bolstering confidence in continued service sector growth.