The recent US tariff rollback on Indian exports, effective February 2, 2026, has slashed the effective duty from a burdensome 50% (25% base tariff plus 25% penalty) to 18%, following India’s commitment to cease Russian oil purchases. This move, announced by President Donald Trump after discussions with Prime Minister Narendra Modi, ends a protracted trade standoff that had stifled Indian exporters since mid-2025. Previously, firms adopted defensive strategies, including heavy discounting and margin sacrifices, to maintain US market share. Now, with tariffs aligned more favorably—lower than competitors like China (47.5%), Brazil (50%), and South Africa (30%)—India’s export sectors are primed for a resurgence in volumes, pricing power, and profitability. This not only rekindles operating leverage but also promises broader macroeconomic benefits, including earnings upgrades, employment gains, and rupee appreciation.
Analysts estimate this tariff reset could add 2–4% to India’s GDP growth over the next three years through enhanced exports, which constitute about 20% of GDP. For Nifty-listed companies, where exports contribute significantly to revenues, the impact is even more pronounced. Overall, Nifty earnings are projected to rise cumulatively by 40–50% over the next three years (FY27–FY29), driven by 12–15% annual growth. This forecast aligns with brokerage estimates: Motilal Oswal projects 12% growth in FY26 and 15% in FY27, while Bank of America anticipates earnings-led Nifty returns of 11–15% annually, potentially pushing the index to 29,000 by end-2026. The tariff relief amplifies these projections by 3–5% through sector-specific upgrades, as detailed below.
1. Textiles & Garments: Leading the Earnings Surge with Volume and Margin Recovery
As the most tariff-sensitive sector, textiles and garments stand to contribute the largest earnings upgrade, potentially adding 15–25% to sector EPS over the next three years. With the US accounting for 28% of India’s textile exports, the rollback reverses a 25–30% export decline seen in 2025, enabling firms to reclaim lost volumes and reduce discounts from 16–25% levels. This translates into 10–15% annual volume growth, boosting operating leverage as fixed costs dilute over higher output.
High-exposure players like Indo Count Industries (~70–75% US revenue) could see EPS upgrades of 20–30%, driven by bed linen demand from US retailers. Kitex Garments (~90%) and Gokaldas Exports (~65–70%) may benefit from 15–20% margin expansion in infant and ready-made wear. Medium-exposure firms such as Trident (~28%) and Vardhman Textiles (~25%) anticipate 10–15% earnings lifts via integrated operations in yarn and towels. Overall, the sector could contribute 5–7% to total Nifty earnings growth, given its weight in the index through diversified players like Arvind Ltd.
Employment impact: This labor-intensive sector employs over 45 million, with ground-level jobs in spinning, weaving, and garmenting hubs like Tirupur and Surat. The rollback could create 500,000–1 million new jobs over three years, reversing 200,000 losses from the 2025 tariffs, as factories ramp up shifts and hire migrant workers.
2. Consumer Staples and Agriculture: Steady Margin Normalization and Export Stability
Consumer staples, including branded foods and agri-exports, could see 10–15% earnings upgrades, adding 3–4% to Nifty growth. Tariff relief stabilizes pricing for basmati rice, spices, and processed foods, where US exposure drives profitability. LT Foods (~39%) and KRBL (~10%) may experience 12–18% EPS boosts from volume recovery in premium rice, while Tata Consumer Products (~12%) benefits from tea and edibles.
Expanding to agriculture, firms like Adani Wilmar (~15–20% indirect US ties) and ITC (~10%) could add 8–12% to earnings through non-basmati rice and spices. Cumulative sector contribution: 2–3% to Nifty’s 40–50% three-year uplift.
Employment: Agri-processing employs 10–15 million in rural areas; increased US demand could generate 200,000–300,000 jobs in farming and packaging, aiding smallholders in Punjab and Uttar Pradesh.
3. Pharmaceuticals: Confidence Boost with Tactical Earnings Tailwinds
Pharma, with the US as its largest market (40–50% of revenues), could upgrade earnings by 10–15%, contributing 4–6% to Nifty growth. While tariffs were less direct, reduced friction accelerates ANDA approvals and partnerships. Gland Pharma (~55%) and Granules India (~50%) may see 15–20% EPS gains from injectables and formulations. Aurobindo Pharma (~47%), Dr. Reddy’s (~45%), Divi’s (~40%), and Sun Pharma (~35%) anticipate 10–15% upgrades via generics and biosimilars.
Employment: The sector supports 3–4 million skilled jobs; growth could add 100,000–200,000 roles in R&D and manufacturing in Hyderabad and Mumbai clusters.
4. Auto & Engineering: Volume Visibility and Supply Chain Gains
Auto and engineering exports could upgrade earnings by 12–18%, adding 3–5% to Nifty. Sona BLW (~43%) and Bharat Forge (~40%) may see 15–25% EPS lifts from EV components and forgings. Ramkrishna Forgings (~35%), Samvardhana Motherson (~25%), Balkrishna Industries (~20%), and Suprajit (~20–25%) benefit from 10–15% volume ramps.
In electronics, Dixon Technologies (~20–25%) and Amber Enterprises (~15%) could add 15–20% to earnings under PLI schemes.
Employment: These sectors employ 15–20 million; tariff relief might create 300,000–500,000 jobs in auto hubs like Chennai and Pune.
5. Chemicals & Specialty Materials: Selective but High-Impact Upgrades
Chemicals could see 12–20% earnings upgrades, contributing 2–4% to Nifty. Vinati Organics (~39%), Navin Fluorine (~35–40%), and Gujarat Fluorochemicals (~30%) may gain 15–25% from agrochemicals and refrigerants. Aarti Industries (~24%) and SRF (~20%) anticipate 10–15% lifts.
Renewables like Suzlon (~15–20%) and Inox Wind (~10%) could add 10–15%.
Employment: Chemical plants employ 2–3 million; expansion could yield 100,000–150,000 skilled jobs.
6. Technology & IT Services: Earnings Reset Through Contract Renewals
Tech firms with 60–80% US revenues could upgrade by 10–15%, adding 5–7% to Nifty. Mphasis (~80%), Persistent Systems (~79%), and L&T Technology (~60%) may see 12–18% EPS growth from digital services. Cyient (~50%), MTAR (~40–50%), and HFCL (~25%) benefit from ER&D and telecom.
Gems & jewelry: Titan (~10–15%) and PC Jeweller (~5–10%) could add 8–12%.
Employment: IT employs 5 million; improved US ties might add 200,000–300,000 jobs in Bengaluru and Hyderabad.
Potential Headwinds and Losers
While broadly positive, sectors like steel (Tata Steel, JSW ~5–10% US exposure) may see muted 5–8% upgrades due to persistent Section 232 tariffs. Oil & gas (Reliance ~10%) could face neutral impacts if US energy exports flood India. Domestic FMCG players like Hindustan Unilever risk 2–5% earnings pressure from input cost inflation.
Employment risks: Minimal overall, but small-scale exporters in handicrafts could lose 50,000–100,000 jobs if larger firms dominate.
Macro Impacts: Nifty Earnings, Employment, and Currency
The tariff rollback could elevate total Nifty earnings by 40–50% over three years from a FY26 base, per consensus (12% in FY26, 15% in FY27–28). This assumes 10–20% sector-specific boosts, aggregating to an additional 3–5% from trade relief.
Ground-level employment: Export sectors could generate 2–3 million jobs over three years, focusing on MSMEs and rural areas, offsetting 2025 losses of 1–1.5 million in textiles and gems.
Near-term INR/USD impact: The rupee has already appreciated to ~90.5 from a low of 92, gaining 1–2% post-deal. Analysts forecast further strengthening to 88–90 in 6–12 months, driven by $5–10 billion in export gains, FII inflows ($15–20 billion), and reduced dollar demand. However, volatility persists if global oil prices rise or geopolitics shift.
This tariff reset is transformative, positioning India for export-led growth. High-exposure firms in textiles, pharma, and tech are top picks, with earnings upgrades likely to manifest in Q1 FY27 results. Investors should watch budget stimuli and global demand for sustained momentum.
