MUMBAI: Warning that if at all the temporarily announced interim India-US trade deal gets implemented it will give only a small boost to exports—tariffs coming down to 18% from 50% and the resultant 0.1-0.7% boost to GDP in FY27—it will offset the gains with higher inflation as the agreement is linked to India stopping Russian oil buy forthwith, a foreign agency report has said in the present shape the deal lacking all the key details, is too shaky for it change its growth forecast.
“If Donald Trump’s social media announcement on February 2 that India will immediately stop buying Russian oil in return for the US cutting additional tariffs on Indian goods to 18% is true, the likely small boost to exports will be offset by higher inflation and we doubt New Delhi would be willing to accept that,” BMI, a non-rating arm of Fitch Ratings said in a note, adding it expects more backroom talks to hammer out the details.
The agency expects headline inflation to trend back up to the 4% target by mid-2026 and buying far more expensive oil on the open market will boost inflation, erode real household incomes and could prompt renewed monetary tightening, it warned.
The report further said, “the deal, if implemented and sustained, would reduce the total effective US tariff rate on Indian goods from 50% to roughly 18%. We estimate that would add 0.1-0.7% to GDP in FY27, with the final figure dependent on the extent to which tariff savings are passed on to US consumers and their price elasticities.
“So far, anecdotal evidence suggests that exporters to the US and US importers have been partially absorbing the tariffs. We therefore believe the short-term export boost from tariff reductions will be at the lower end of our estimate range, at around 0.2% of GDP,” BMI said, adding “even so, we are not revising our growth forecasts.”
“Because if New Delhi has indeed committed to halt Russian oil purchases, the gains from stronger export growth would be offset by higher inflation,” it said.
On the unfeasibility of meeting the Russian equivalent demand from Venezuelan, it said to start with, Trump’s assertion that India can buy Venezuelan oil instead is unrealistic as Russia, despite sanctions, was India’s largest supplier in 2025, averaging 1.7 million barrels per day, far more than Venezuela’s total export capacity of around 7,50,000 barrels per day. Moreover, Mainland China already imports around 500k b/d from Venezuela.
Another catch is that it is also unclear if Venezuelan oil will be as steeply discounted as Russian oil. Citing a Financial Times report of January 29, it said India was getting Russian oil at $5/barrel, roughly a two-thirds discount from Brent prices. And as sanctions ease and US buyers re‐enter, Venezuelan discounts are likely to narrow, reducing its attractiveness versus today’s Russian bargains.
“Stated differently,” BMI report said, “the US-India trade deal is on shaky ground. The very high likelihood that India will not gain growth-wise from the deal means it is unlikely to implement it as Trump sees it. What is more, Trump has a history of falsely interpreting his interlocutors’ commitments in his favour, running well ahead of what they promised.”
It is also highly skeptical of Trump’s claim that New Delhi has committed to buy $500 billion worth of American goods in the next five years and that it is more likely that New Delhi had simply re-affirmed previous bilateral discussions on pushing total bilateral trade to $500 billion by 2030. After all, Indian imports were only around $45 billion from America in FY25.