"Minimal Impact On India": Centre On Trump's 25% Tariff On Iran Partners

The Indian government has stated that the 25% tariff imposed by former U.S. President Donald Trump on countries engaging in business with Iran is expected to have a minimal impact on India. Government sources, speaking to news agencies, have pointed to India's limited trade exposure with Iran as the reason for this assessment.

Limited Trade Relations

Iran is not among India's top 50 global trading partners. In the last fiscal year, India's total trade with Iran amounted to approximately $1.6 billion, which is about 0.15% of India's overall trade. This figure is expected to decrease further due to broader external economic factors. In 2024, Iran's total imports were about $68 billion, with the UAE, China, Turkey, and the European Union accounting for the bulk of it, while India's share was only $1.2 billion, or 2.3%.

Humanitarian Trade

Ajay Sahai, Director General of the Federation of Indian Export Organisations (FIEO), stated that Indian companies and banks adhere to the U.S. Office of Foreign Assets Control (OFAC) norms and are involved in permitted humanitarian trade, primarily food items and pharmaceuticals. Because of the humanitarian nature of much of the trade between India and Iran, it largely falls outside the scope of sanctions, thus negating any adverse impact on India. In 2024-25, trade between the two countries totaled $1.68 billion, with $1.24 billion in exports mainly from the agricultural and pharmaceutical sectors.

Concerns Among Exporters

Despite the government's assurance, some concerns remain among Indian exporters. Several Indian rice exporters have grown apprehensive, especially since India is a major supplier of rice to Iran, responsible for nearly two-thirds of Iran's rice imports. Some suppliers are hesitant to enter into new contracts with Iranian buyers. One exporter noted concerns about payments for rice shipped in the past few months, with buyers reporting incomplete deliveries or having fled the country due to ongoing protests.

Other Challenges

The depreciation of the Iranian currency poses a greater challenge for exporters, as it reduces consumer purchasing power and increases the risk of contract cancellations. Some rice exporters are routing their exports through the UAE to mitigate risks.

Broader Implications

Trump's tariff announcement comes amidst already strained relations between the U.S. and Iran, with escalating pressure on Tehran due to widespread protests. While China is Iran's largest trading partner, this move also has consequences for India. Some experts view the tariff as a pressure tactic to influence India in trade negotiations with the U.S.

Despite these concerns, the Indian government maintains that the overall impact on India's trade scenario will be limited.