India’s Firm Stand Against US Tariffs: Why Modi’s Move Could Reshape the Market
In a move that’s making headlines across the globe, Prime Minister Narendra Modi has made it crystal clear: India will not bow down to the United States. This comes after US President Donald Trump doubled tariffs on Indian goods—from an already hefty 25% to a staggering 50%. The trigger? Washington’s dissatisfaction with India buying oil from Russia during the ongoing Russia–Ukraine war.
Trump’s argument is that by purchasing Russian oil, India is indirectly financing Russia’s war efforts against Ukraine—a country the US openly supports with money, weapons, and other aid. But here’s the irony: America itself trades with Russia, and so do US allies in Europe and Asia. Even China, Russia’s largest crude oil buyer, has faced little more than a symbolic tariff hike—one that is currently paused because the US doesn’t want to hurt itself economically.
The Four Key Messages from Modi
PM Modi’s statements send a strong diplomatic and economic message:
India will not bow to the US.
No more endless negotiations with leaders who disrespect India or treat it as subordinate.
Farmers are the backbone of India.
India will not compromise their interests by importing inferior US agricultural goods or equipment.
Modi takes personal responsibility.
He’s prepared to face the political and economic costs of this tough stance, calling it his personal decision.
Friendship must be between equals.
No one-sided relationships where India accepts threats in the name of “partnership.”
This firm position is a significant departure from the softer diplomatic approach seen in past negotiations.
The Immediate Market Reaction
When the tariff hike was announced, many predicted a bloodbath in the Indian stock market. Initially, markets did dip—but by the end of the day, they closed in positive territory. This resilience signals a major shift: India’s domestic investors are now powerful enough to counter foreign sell-offs.
Historically, Foreign Institutional Investors (FIIs) dominated Indian markets. Today, Domestic Institutional Investors (DIIs)—mutual funds, insurance companies, and pension funds—hold more market share than FIIs.
DIIs own 17.62% of NSE-listed companies, slightly higher than FIIs at 17.22%.
In the Nifty 500 index, DIIs hold 19.2% compared to FIIs’ 18.8%.
July 2025 saw record SIP inflows—₹21,000 crore per month—showing strong retail participation.
Government-backed entities like LIC, EPF, and NPS have pumped over ₹55,000 crore into the markets between April and July 2025, providing long-term stability.
Changing Investment Patterns
In the past, DIIs preferred safe blue-chip stocks. Now, they’re diversifying into mid-cap and small-cap companies, strengthening India’s smaller enterprises.
In FY26 Q1, 63% of DII investments went into small-cap stocks—a bold, nation-building move.
This shift shows growing confidence in India’s economy and an intent to make it self-reliant.
Which Sectors Will Feel the Heat?
While the long-term outlook remains positive, certain sectors could face short-term challenges from US tariffs:
Textiles – A major Indian export to the US.
IT Services – Heavy reliance on US clients means potential job shifts.
Pharmaceuticals – India supplies ~40% of US medicines; tariffs will raise prices in America but could reduce Indian export volumes.
Gems & Jewellery – Especially diamond exports.
Auto Components – Especially parts shipped to US manufacturers.
Agro Exports – Agricultural goods sold to US markets.
Short-term volatility is likely, but many analysts believe the US will also suffer higher inflation and business losses, especially in sectors reliant on Indian imports.
Why the US Is Softer on China but Tough on India
The tariff pause on China isn’t just diplomacy—it’s fear. The US is far more dependent on Chinese manufacturing. Heavy tariffs on China would hurt American businesses and consumers more severely than they would hurt Beijing. In contrast, Trump may have assumed India would be easier to pressure—but Modi’s firm “no compromise” stance has changed the game.
Long-Term Outlook
In the short term, certain Indian sectors will face revenue pressures. But in the long term:
US tech giants like Microsoft, Google, and Facebook may lobby against these tariffs because they rely heavily on Indian IT talent.
Domestic investors will continue to strengthen India’s financial independence.
The US may eventually reduce tariffs to avoid hurting its own economy.
Bottom line: This is a moment of national pride. Modi’s decision shows that India is ready to stand as an equal on the world stage. While there will be bumps in the road, the country’s growing domestic investment power gives it the ability to absorb shocks that once would have crippled the market.