In response to President Donald Trump's decision to increase tariffs on Indian goods, Prime Minister Narendra Modi has asserted that India will protect its farmers at any cost. Trump's move, which includes an additional 25% tariff on certain Indian goods, brings the total duties on some exports to 50%. The tariffs are set to take effect on August 27. This decision is viewed as a consequence of India's continued purchase of Russian oil, despite warnings from the U.S..
Modi, in a recent address, emphasized that the interests of Indian farmers, fishermen, and dairy farmers are a top priority, and the country will not compromise on their well-being. He stated his readiness to bear a "heavy price" to safeguard their interests. This stance reflects India's unwillingness to concede to U.S. demands for greater access to its agricultural and dairy markets.
The Ministry of External Affairs (MEA) has criticized the tariffs as "unfair, unjustified, and unreasonable". The MEA also noted that other countries importing Russian oil have not faced similar punitive actions. Despite the increased tariffs, India has affirmed that it will take necessary actions to protect its national interests.
Experts predict that the 50% tariffs could significantly impact Indian exports, particularly in sectors such as textiles, ready-made clothes, auto components, steel, and gems. S.C. Ralhan, the president of the Federation of Indian Export Organisations, described the tariffs as a "severe setback" and estimates that nearly 55% of Indian shipments to the U.S. will be affected. Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), anticipates a potential 40-50% reduction in India's exports to the U.S.. The increased tariffs could make Indian goods more expensive in the U.S. market, disadvantaging them compared to competitors like Vietnam, Bangladesh, and China.
Dammu Ravi, secretary (economic relations), Ministry of External Affairs, suggested that India would explore alternative markets like the Middle East, Latin America, Africa, and South Asia. Ravi expressed optimism that the situation would stabilize through dialogue.
To mitigate the impact of the tariffs, the Indian government is reportedly preparing an export promotion mission with a proposed outlay of Rs 20,000 crore. This mission will focus on trade finance, non-trade finance, brand promotion, e-commerce, warehousing, and trade facilitation. Other measures under consideration include customs relief, GST acceleration for exports, and expansion of the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme.
Economists estimate that the tariffs could reduce India's GDP growth by up to 1%. Sectors like garments, precious stones, electronics, pharmaceuticals, auto parts, and MSMEs are expected to be hit.
India's stance on importing Russian oil remains firm, citing it as a necessity for ensuring energy security for its 1.4 billion people. The country has refuted claims that it is "fuelling Russia's war machine". India has also emphasized that its oil imports are based on market factors.
Despite the trade tensions, negotiations between India and the U.S. are expected to continue. A U.S. negotiating team is scheduled to visit India on August 25. Some experts suggest India may be open to reducing tariffs on select U.S. farm items like almonds and cheese. However, India remains resolute in its opposition to importing genetically modified (GM) products and easing restrictions on beef and cattle feed.
