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Key Points

India's corporate bond market is demonstrating remarkable resilience despite facing extreme US tariff measures. Barclays Research indicates that strong corporate fundamentals and access to domestic funding will limit lasting damage to credit markets. While certain export sectors like electrical machinery and gems will bear the brunt of the 50% tariff increases, high-grade credits are expected to weather the storm. Meanwhile, diplomatic channels remain open as both countries express commitment to enhancing their bilateral relationship despite trade tensions.

Key Points: India Corporate Bond Market Resilient Amid Extreme US Tariffs

  • High-grade credits may see temporary spread widening from tariff shock
  • Strong corporate fundamentals shield bond market from lasting damage
  • Trade-weighted tariff rate on Indian exports jumps to 35.7 percent
  • Electrical machinery and gems among sectors facing biggest tariff impact
2 min read

India's corporate bond market remains resilient despite extreme US tariffs

Despite 50% US tariffs on Indian goods, corporate bonds show resilience due to strong fundamentals and domestic funding access, Barclays reports.

"Indian corporate credits are expected to remain resilient even as the US import duties on Indian goods soar to unprecedented levels - Barclays Research"

New Delhi, Aug 27

Despite the latest tariff escalation from the US administration, the Indian corporate bond market is expected to suffer limited lasting damage due to strong corporate fundamentals and access to domestic funding, a report said on Wednesday.

However, high-grade credits could see some knee-jerk spread widening, but Indian corporate credits are expected to remain resilient even as the US import duties on Indian goods soar to unprecedented levels, Barclays Research said in a note.

After the combined 50 per cent levies go into effect on Wednesday, the trade-weighted tariff rate on Indian exports will increase to 35.7 per cent from the current rate of 20.6 per cent and 2.7 per cent at the beginning of 2025, the company stated.

In contrast, India continues to impose an average 9.4 per cent tariffs on US imports, resulting in the largest bilateral imbalance in decades.

The company pointed out that while smartphones, petroleum products, and pharmaceuticals are still temporarily exempt from the 50 per cent tariff rates, electrical machinery, gems and jewellery, clothing, and machinery will see the biggest impact.

It is anticipated that the impact on corporate debt will be limited despite the export shock, the note said.

Earlier, senior officials from the US and India held virtual consultations where they "advanced bilateral initiatives" and talked about trade amid tensions over tariffs and mediation claims, the State Department said.

In contrast to the harsh remarks made by US President Trump, Vice President JD Vance and trade officials, the US readout of the virtual US-India 2+2 Intersessional Dialogue, held on Monday, sounded positive for the future of India-US relations.

The External Affairs Ministry also echoed the US statement in a readout.

According to the statements, the officials conveyed their nations' "eagerness to continue enhancing the breadth and depth of the bilateral relationship in a manner that benefits the people of America and India."

According to the statements, they "exchanged perspectives on several shared strategic priorities, discussed regional security developments, and advanced bilateral initiatives."

The readouts also noted that topics covered included critical minerals exploration, trade and investment, energy security, including bolstering civil-nuclear cooperation, counternarcotics and counterterrorism cooperation, and more.

- IANS

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Reader Comments

R
Rohit P
The tariff imbalance is worrying though - 35.7% on our exports vs 9.4% on US imports? We need to negotiate better terms. This one-sided approach hurts Indian manufacturers.
A
Arjun K
Good that smartphones and pharma got temporary exemption. These sectors employ millions of Indians. Hope the government continues to protect our key industries during negotiations.
S
Sarah B
The positive diplomatic dialogue gives me hope. Trade wars never benefit anyone long-term. Both countries need to find middle ground for mutual economic growth.
V
Vikram M
Time to focus more on domestic consumption and trade with other friendly nations. Over-reliance on any single market makes us vulnerable. ASEAN and EU markets should be prioritized.
M
Michael C
The resilience mentioned is encouraging, but let's not underestimate the impact on SMEs in affected sectors like gems, jewellery and textiles. They need government support during this transition.

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