The imposition of the hiked tariffs by the US on Indian goods have fanned the flame of uncertainties in the trade world, says Indian credit ratings agency, Crisil, in its latest report released on Wednesday.
The trade headwinds have shaken investor confidence so much, that it will prove to be a new hindrance to capital expenditure decisions in the current financial year, the report said.
“The new challenges, which are holding back the animal spirits of the Indian private sector despite supportive macroeconomic parameters, are disruptions in the global supply chain due to rising geopolitical tensions and lingering domestic inefficiencies like high power and land costs,” it stated.
On August 27, 50 per cent tariffs imposed by the US administration on Indian goods came into effect. The additional 25 per cent tariffs were imposed by US President Donald Trump for India’s purchases of Russian oil.
Also Read: From garments to leather exports: Sectors hit hardest by tariffs
As of August 24, US tariffs on India stand higher than those on Bangladesh, Vietnam and Indonesia.
While the government has so far been strong in driving investments, private expenditure has remained muted even though healthy corporate balance sheets support fresh investments.
The report says in such a scenario, free trade agreements (FTAs) with other countries can help enhance investor confidence by reducing tariff barriers and establishing predictable trade policies.
“Opportunities stemming from new trade agreements, like the FTA with the UK, and the ability of the corporate houses to invest can help cushion impact of tariffs,” it added.
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