NEW DELHI: India’s economy is now projected to grow at 6.5% in FY2026, an upward revision from the earlier forecast of 6%, according to a report released by credit rating agency ICRA. The improved outlook is attributed to ongoing GST reforms and industry-level strategies that are expected to cushion the blow from steep US import tariffs.

The report highlights that while high US tariffs—which now reach up to 50% on Indian imports—pose a significant challenge, proactive responses by Indian exporters and supportive policy measures are mitigating their immediate impact. These tariffs are notably higher than those imposed on exports from countries like China, Vietnam, Bangladesh, and Japan.

Despite the tariff shock, ICRA notes that industries are adapting through trade rerouting, market diversification, and value addition. Exporters are increasingly leveraging tariff-exempt trade routes through Mexico, Europe, and Dubai, helping reduce their dependence on the US market.

The United States remains a key destination for Indian exports, covering over 140 product categories, including auto components and seafood. However, the report cautions that the high tariff burden could weigh on profit margins and sectoral demand, especially in FY2026.

Some sectors are showing resilience. In the auto industry, companies are responding by expanding into new markets, enhancing product value, and using subsidiaries in tariff-free regions. Most report minimal short-term impact, citing cost pass-through mechanisms and strong customer loyalty.

In the metals sector, volumes remain stable despite higher tariffs. Indian companies have successfully passed on the additional costs to US buyers, supported by limited domestic production capacity for specialised metals in the United States.

While many firms are navigating the challenges effectively, ICRA warns that certain industries may still face profitability pressures in the coming fiscal year.