Ratings firm Crisil said on Wednesday that the uncertainties surrounding the US tariffs might be a new hindrance to capital expenditure decisions in the current financial year.
The additional 25 per cent tariff imposed by US President Donald Trump on India for its purchases of Russian oil came into effect on Wednesday, bringing the total amount of levies imposed on New Delhi to 50 per cent.
Crisil said that the government has so far been driving investments, with private corporate capital expenditure remaining muted.
According to the report, the imposition of tariffs is likely to hit sentiments, even as healthy corporate balance sheets support fresh investments.
In the current uncertain environment, free trade agreements (FTAs) can enhance investor confidence by reducing tariff barriers and establishing predictable trade policies, the ratings firm said.
As of August 24, US tariffs on India stand higher than those on Bangladesh, Vietnam and Indonesia.
The new challenges, which are holding back the animal spirits of the Indian private sector despite supportive macroeconomic parameters, are disruptions in the global supply chain due to rising geopolitical tensions and lingering domestic inefficiencies like high power and land costs, the report said.
According to the study, the opportunities stem from new trade agreements, like the FTA with the UK, and the ability of the corporate houses to invest.