India-US Trade Deal Gives Exports a Competitive Edge; ICICI Sees Boost for Textiles, Engineering and INR

India’s exports to the United States are expected to gain a competitive edge following the reduction in tariffs to 18% under the interim India-US trade framework, according to an ICICI Bank Global Markets report. The report notes that the tariff cut reverses the pressure created by the earlier 50% levy, which had impacted nearly 66% of India’s exports to the US, or about $57 billion worth of goods.

India’s goods exports to the US currently stand at approximately $86.7 billion, while imports from the US are around $45.3 billion, making the US India’s largest export destination.

ICICI’s analysis shows that exports in the high-tariff segment declined sharply after the imposition of the 50% levy. Between September and November 2025, exports from this segment fell 23% year-on-year, weighing on labour-intensive sectors such as textiles, leather, gems and jewellery, and agriculture.

In contrast, exports in the non-tariff segment rose 57% year-on-year, partially offsetting the decline. With peak tariffs now capped at 18%, the report expects India’s exporters to regain price parity with Asian peers, improving volumes and margins across key categories.

Sectors Positioned to Benefit:

According to the report, labour-intensive and engineering sectors stand out as the biggest beneficiaries of the trade deal:

• Textiles exports to the US stood at $10.4 billion in FY25, growing at a 4.1% CAGR since FY19
• Engineering goods exports reached $17.8 billion, expanding at an 8.8% CAGR
• Electronic goods exports, including mobiles, surged to $15.2 billion, clocking a 29% CAGR
• Pharmaceutical exports touched $10.5 billion, growing at 9.4% CAGR 

ICICI notes that tariff parity improves competitiveness for Indian exporters relative to peers in Vietnam, Bangladesh, and China, especially in textiles, leather, and agriculture.

Trade Deals Now Cover Two-thirds of Global Markets

With the US agreement added to existing trade pacts, India now has trade agreements covering around 66% of global markets, a structural positive for exports over the coming years. Exports to the US and EU have grown faster than overall exports, at 8.7% CAGR and 8% CAGR, respectively, compared with 4.8% CAGR for total exports since FY19.

ICICI expects India’s external sector to strengthen meaningfully post the trade deal. The current account deficit (CAD) is projected to remain contained at around 1% of GDP in FY27, equivalent to roughly $45 billion, supported by improved export competitiveness and stable services inflows.

The report also forecasts a turnaround in the balance of payments, with BoP inflows of $15 billion in FY27, compared with outflows in FY25 and FY26.

Positive Implications for INR

The trade agreement is seen as supportive for the rupee, which has depreciated 7.9% since September 2024 amid foreign portfolio outflows. ICICI expects improved trade flows and capital inflows to provide stability to the currency and ease pressure on domestic liquidity.

Over the medium term, the report sees trade deals as growth-positive, supporting an upward bias to India’s FY27 GDP growth estimate of 6.5%.

Also read: India-US Interim Trade Deal Sparks Broad Rally in Textile Sector