IGI Logo

Below the Perspective on Markets by Mr. Vikram Kasat, Head - Advisory, PL Capital

Markets are likely to surge nearly 3% higher on open

India and United States have agreed to a trade agreement under which reciprocal tariffs on Indian goods will be slashed to 18% from 25%, and the additional 25% duty on purchases of Russian crude oil will be eliminated. The trade deal will be " effective immediately", President Donald Trump said, following a phone call with Prime Minister Narendra Modi late Monday, offering immediate tariff relief for India.

Lower Than Most Regional Peers

At 18%, India's tariff rate is now lower than that of several major export-oriented Asian economies. Bangladesh, Sri Lanka, Taiwan and Vietnam face tariffs of 20%, while Indonesia, Malaysia, Thailand, the Philippines and Pakistan face tariffs of 19%. Cambodia also faces a higher tariff burden at 19%.

The deal includes the rollback of US tariffs on India from 50% to just 18%, a commitment from India to increase US imports by $500 billion, and a reduction in dependence on Russian oil.

The trade deal is likely to stabilise the rupee and ease pressure on domestic interest rates.

Labour-intensive sectors such as textiles, gems and jewellery, and engineering goods are the clear winners, as all faced growth headwinds due to higher tariffs.

India will have to move away from Russian crude oil in favour of imports from the US and Venezuela, following the removal of Russian oil-related penalties

Indian equity markets are expected to surge 3% on open as the deal completely eliminates key policy uncertainties. The positive sentiment could trigger immediate foreign capital inflows, potentially turning India's Balance of Payments (BoP) position.

Above views are of the author and not of the website kindly read disclaimer