Moody’s Ratings said on Tuesday that India is unlikely to immediately stop all crude oil purchases from Russia following the India–US trade deal, noting that a sudden shift could be disruptive to economic growth and may have inflationary implications for the country.
“Even though India has reduced its purchase of crude oil from Russia in recent months, it is unlikely to cease all purchases immediately which could be disruptive to India’s economic growth,” Moody’s said in its comment on the trade agreement.
The ratings agency added that “a completely shift toward non-Russian oil could also tighten supply elsewhere, raise prices and pass through to higher inflation given that India is one of the world’s largest oil importers,” highlighting constraints around a rapid reorientation of India’s energy sourcing.
Alongside its assessment on energy imports, Moody’s said the reduction in US tariffs under the trade deal would support India’s export outlook, particularly shipments to the United States, India’s largest goods export market.
“The reduction of the US tariff rate on most Indian goods will reinvigorate India’s goods export growth to the US, which remains the country’s largest goods export market, accounting for about 21% of India’s total goods exports for the first eleven months of 2025,” the agency said.
Moody’s said lower tariffs would be “credit positive for labor intensive sectors such as gems, jewelry, textiles and apparel, which rank the top export sectors,” benefiting industries that are highly sensitive to tariff barriers and global demand conditions.
However, it said the impact would be limited for some large export categories. “Pharmaceuticals and consumer electronics, the other two major export sectors, had been exempt from the 50% high tariffs and therefore are unlikely to be affected by the tariff reduction,” Moody’s said.
India has agreed to step up purchases of petroleum, defence goods, electronics, pharmaceuticals, telecom equipment and aircraft from the United States under the trade deal, a government official told Reuters on Tuesday.
US President Donald Trump announced the agreement on Monday, saying Washington would cut tariffs on Indian goods to 18% from 50% in exchange for India halting purchases of Russian oil and lowering trade barriers. Trump said India had agreed to “BUY AMERICAN at a much higher level”.
According to Reuters, Trump said India could buy as much as $500 billion worth of US energy, coal, technology, agricultural and other products under the deal.
The Indian government official, who did not want to be named, told Reuters that India had agreed to increase purchases of US goods to reduce the trade deficit that the United States runs with India.
“The commitment to buy US products covers sectors like pharmaceuticals, telecom, defence, petroleum and aircraft. It will be done over the years,” the official said.
The official added that India had also offered market access in some agricultural products, without providing details. “We have offered market access in some agricultural products too,” the official said.
India’s trade ministry did not immediately respond to an email seeking comment, Reuters reported.
Commerce ministry data showed that India’s exports to the United States rose 15.88% year-on-year to $85.5 billion in the January–November period, while imports from the US stood at $46.08 billion.
The official said the agreement announced this week represents the first tranche of the trade deal, with negotiations on a more comprehensive agreement set to continue over the coming months. Under Washington’s immediate demands to address the trade imbalance, India has also cut tariffs on automobiles, the official said.
The announcement lifted investor sentiment on Tuesday, with the benchmark Nifty 50 index rising nearly 3% and the rupee strengthening more than 1% to 90.40 per dollar in early trading.
India and the United States reached the trade deal after months of strained negotiations, following a phone call between Prime Minister Narendra Modi and Trump late on Monday. The additional penal levy imposed on India for purchasing Russian oil has also been withdrawn.
Trump said Modi had agreed to stop buying Russian oil and increase purchases from the US and potentially Venezuela, though the Indian side has not publicly commented on any such commitment.
The agreement marks an easing of tensions in India–US ties after a period marked by tariff actions. The US is India’s top export destination, accounting for about 20% of merchandise exports, and its largest trading partner, with bilateral trade valued at $131.84 billion.
New Delhi and Washington have been negotiating a broader bilateral trade agreement since February last year, targeting $500 billion in trade by 2030, up from about $191 billion currently.
The deal comes days after India concluded a free trade agreement with the European Union, giving it preferential access to two of the world’s largest trading blocs. India has now signed five trade agreements in the past 12 months, including pacts with the UK, the EU, Oman and New Zealand.
Source Name : Economic Times