India may be cautious about opening up sensitive sectors: Care Ratings

Despite headwinds from US tariffs, China’s overall export performance has remained resilient, supported by stronger shipments to other regions. For India, its domestically driven economy and relatively low share of goods exports to the United States should provide some buffer, according to Care Ratings.

Though the United States and China have extended their trade truce by another 90 days to continue negotiations, issues such as trans-shipment-linked tariffs remain a key factor worth monitoring for China’s trade outlook, it noted in its latest Global Economy Update.

Despite tariff headwinds, China’s overall export performance has remained resilient, supported by stronger shipment to other regions, while India’s low share of goods exports to the US should provide some buffer, Care Ratings said.
Though there is growing pressure on India to negotiate a trade deal with the US, the agency feels the country is likely to remain cautious about opening up sensitive sectors.

Though there is growing pressure on India to negotiate a trade deal with the United States, Care Ratings feels the country is likely to remain cautious about opening up sensitive sectors like agriculture and dairy, and therefore, the negotiations may take some time to conclude.

Furthermore, key US suppliers of footwear, textiles and leather like Vietnam and Indonesia could gain from lower US tariffs compared to India.

Strong front-loading in international trade, lower worldwide effective tariff rates vis-a-vis April expectations and improvement in global financial conditions supported the upward revisions to the 2025 growth forecasts across economies, according to the document.

This front-loading is expected to unwind in the coming quarters keeping the 2025 growth below the pre-pandemic historical average of 3.7 per cent, Care Ratings noted.

Front-loading of some trade flows in anticipation of tighter trade restrictions provided near-term offset. This is expected to fade in the second half of 2025. However, 2026 trade growth forecast has been trimmed lower amid volatile global trade conditions, it said.

Global foreign direct investment (FDI) net inflows as a percentage of global gross domestic product (GDP) have broadly declined since the Global Financial Crisis, with subsequent shocks adding further pressure.

While FDI flows as a percentage of GDP declined for major economies, the ‘connector’ economies have gained from the investment reorientation strategies of the United States and China.

‘Connector’ economies have a favorable mix of FDI policies and structural characteristics. Furthermore, they are geopolitically non-aligned and can serve as conduits in trade and investment flows between geopolitical blocs.

Debt levels in many economies is going up faster than the economic growth, raising long-term debt sustainability concerns, Care Ratings added.

Fibre2Fashion News Desk (DS)

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