India’s economy stays resilient despite US tariffs, with exports rising and FDI recovering, highlighting self-reliance and strong domestic fundamentals.
India weathers US tariffs: exports climb, FDI rebounds, and Make-in-India strategy boosts economic resilience amid global uncertainty (Photo: File)
In August 2025, India faced a setback as net Foreign Direct Investment (FDI) during the month fell 159% with more money leaving the country than entering. Gross investments were at $6,049 million, 30.6% lower than the level in August last year and 45.5% lower than the previous month. As per official data, it was only the second time this financial year that outflows exceeded inflows. The likely trigger was the US tariff of 25% additional tariff on India over and above the reciprocal tariff of 25%. To duck the potential tariff implications, suppliers and investors pre-empted their investment decisions resulting in India setting a fifty-month high of $11.11 billion in July 2025.
The Indian economy has been facing turbulence owing to the fickle foreign policy of our allies, especially the US. The Trump administration is shaking up the world order revoking security arrangements with the EU region while also intervening aggressively in the middle-east. The Indian economy responded by increasing emphasis on Make-in-India so that our markets remain self-reliant. As the world order changes due to conflict in the region and whims of leaders, a self-sufficient economy is the best insurance against foreign headwinds.
The world saw the resilience of the Indian economy when a terror attack and a military retaliation in the form of Operation Sindoor didn't create any tremors in the domestic market. Apart from eliminating Chinese manufactured weaponry with home-grown missiles like Brahmos, the Indian economy surprised the world by providing a glimpse of our combined national strength. A swarm of drones by Turkey and tacit support of China to Pakistan couldn't even scratch the surface of the sturdy Indian economy.
FDI and Economic Strength
FDI is a critical component indicating the strength of an economy. When foreign investors make investments, it's a third-party verification that the business environment is capable of delivering returns. In the past decade, India has permitted FDI investments in sectors like defense, insurance and single brand retail. Opening up of the economy along with improving ease of doing business and better governance has paid rich dividend. Annual FDI into India doubled from $36 billion in FY14 to over $80 billion in FY24 making India among the leading investment destinations.
Despite retributive tariffs by the US, India has remained relatively steady. While the first month after Trump tariffs led to a severe decline in shipments with outflow to US declining 12%, India has recovered lost ground in October by registering a fall of just 8.6%. The worst is already behind us despite not budging an inch on our geo-political interests.
Responding to US Pressure
When Trump erected the tariff barrier against India, the expectation in Washington DC was that of a docile India that will meekly surrender to US bullying. Trump repeatedly claimed that India is responsible for bankrolling the Russian economy and fuelling the Ukraine war by buying cheap crude oil. Since then, Trump hasn't rolled back the tariff rate even as India continues to stand by our ally. India has been dealing with the economic attack by supporting exporters through recent trade agreements with UK, UAE and Australia. It also has introduced a lowering of taxes on raw materials and a $5.1 billion package.
Far from initiating suffering on Indian consumers, Trump's actions have led to a net positive impact. In fact, the Modi government cut domestic taxes on hundreds of consumer goods to fuel domestic consumption. Tariffs clearly isn't working as far as India is concerned. It has proved as futile as Turkish drones in inflicting damage.
The victory hasn't been just on the economic level but also in the diplomatic sphere. While the US has been making incessant statements about a deal with India, the Indian negotiators and leadership have silently and maturely displayed an utter disregard of American brinkmanship. The only reason why India could afford to do it is the inherent resilience of our economy.
Economic Resilience
Unlike Western economies run by debt, the Indian economy rests on the sound fundamental principle of productive growth and a booming middle class. Our determination to stick to zero concession to the US flows out of the confidence that the economy can withstand possible pressures on its exports. Contrary to expectations, India's total exports increased to $69.2 billion in August 2025, up 9.3% over its level in August last year. It grew by 6.74 per cent to $36.38 billion in September despite global headwinds. Imports jumped 16. per cent to $66.53 during the same period.
The statistics clearly prove that India is far more self-dependent than previously assumed by the international community. By closing the tap of FIM or by building insane tariff walls, India won't be flustered. India will sign a deal with foreign powers on its own terms because we have demonstrated that Western economies need India as much as we need them. When the final FDI numbers come in at the end of the fiscal year, the numbers will tell the same story that the export data revealed. A resilient Indian economy will receive a resilient FDI inflow despite temporary setbacks.
Shweta Shalini is a political commentator.
