Amid growing concerns over the impact of escalating US tariffs on Indian goods, Finance Minister Nirmala Sitharaman has assured full government support to Indian exporters. Sitharaman met with a delegation from the Federation of Indian Export Organisations (FIEO) to address their concerns and explore avenues to protect their interests. The US has imposed a steep 50% tariff on certain Indian goods, effective August 27, impacting labor-intensive sectors such as textiles, gems and jewellery, leather, footwear, and shrimp.
The finance minister emphasized the government's commitment to addressing the challenges faced by the exporting community and safeguarding their competitiveness and jobs. She affirmed that the government will extend comprehensive support to exporters to sustain growth momentum and uphold India's resilience in international trade. Sitharaman also underlined the importance of protecting workers' livelihoods, urging industry leaders to reassure employees of job continuity amidst global headwinds.
The US tariffs, which have increased to as high as 50%, have raised concerns that the steep tax on Indian exports to the US will hit sectors such as textiles, gems and jewellery and mechanical appliances, potentially dragging India's economic growth lower. Barclays has cautioned that nearly 70% of India's merchandise exports to the United States face a “serious threat” after the latest move by the US. Exports from affected sectors could plunge 70%, from $60.2 billion to $18.6 billion, while overall shipments to the US could fall by 43%.
In response to the US tariffs, the Indian government is considering various support measures for exporters. These include the rollout of an export promotion mission, moratoriums on loan repayments, and emergency credit lines. The government is reportedly assembling a multi-billion dollar package to free up cash for exporters. The Finance Ministry has extended the exemption on cotton import duty until December 31, 2025, to support the textile industry.
The government is also encouraging diversification of export markets. India is targeting 40 key markets, including the UK and Japan, to boost textile exports. This strategy aims to position India as a reliable supplier of sustainable textiles. India has been seeking to diversify its markets and recently signed a free trade deal with the UK. The Commerce Ministry believes that the impact of the US tariffs will be short-term and that the long-term effect on overall trade and GDP will remain limited.
Prime Minister Narendra Modi has urged Indians to prioritize purchasing goods made in India. The government also plans to revamp the nationwide goods and services tax, potentially cutting most rates to 5% or 18% to boost spending. India is also exploring alternative payment mechanisms for imports, such as paying for Russian oil in rupees, to reduce reliance on US currency reserves.
While the Indian government is working to mitigate the impact of the US tariffs, concerns remain about potential job losses and economic disruption. Exporters have petitioned the government for measures to address the crisis. The RBI has begun consultations with exporters to address some of their demands, including a moratorium on loan repayments. The government is also considering reforms to the SEZ law and steps to unshackle businesses from undue regulations.
