US Tariffs: India''s Export Shield Strategy

New Delhi, Aug 30 (PTI) The Commerce Ministry is working on short, medium, and long-term action plans to help exporters deal with the steep 50 per cent US tariffs imposed on Indian goods entering Washington, an official said.

Several special economic zone policy flexibility norms are also under consideration, the official said.

The government is also operationalising E-commerce export hubs with simplified return logistics, easier inter-state movement and GST refunds.

"Alongside, the inventory model for e-commerce exports would allow third-party facilitation entities to manage compliance and logistics, easing the burden on MSMEs and enabling them to focus on quality and branding," the official said.

The guiding principles of the plan, the official said, include providing immediate liquidity relief to exporters; maintain order levels and employment in vulnerable sectors; build resilience in supply chains through structural reforms; and leverage existing trade pacts while tapping new market access opportunities, the government official said.

It also includes supporting exporters with non-financial enablers like branding initiatives, reducing compliance, and logistics costs; and maintaining perspective that while exports are critical, India remains a domestically anchored economy, with merchandise exports (USD 438 billion) accounting for a moderate share (10.4 per cent) of GDP (USD 4.12 trillion) and with limited value addition in some sectors.

As part of the immediate or short-term response, the government is considering several steps to ease liquidity, prevent insolvencies, and provide greater flexibility for units in SEZs, and promote targeted import substitution.

In the medium term, the official said, the focus will shift towards leveraging India's free trade agreements (FTAs), intensifying buyer-seller outreach, and strengthening GST reforms to enhance competitiveness.

To increase utilisation of these agreements, the commerce ministry is planning intensified outreach on FTA benefits as many MSMEs remain unaware of specific tariff advantages; large-scale buyer-seller meets in India and abroad, and sending exporter delegations to FTA markets like, Australia for apparel, the UAE for gems, and the UK for leather to establish direct relationships with buyers.

India has so far implemented trade pacts with over a dozen countries and regions, including Australia, the UAE, Japan, Korea and ASEAN bloc.

In the long term, the government is committed to building a resilient, diversified, and globally competitive export base, anchored in the export promotion mission (EPM), SEZ reforms, and supply chain resilience initiatives.

It is anticipated that exporters may face delayed payments, stretched receivable cycles, and cancelled orders due to the tariff shock. To prevent working capital stress and protect employment, the government is considering several steps.

The proposed GST rationalisation is expected to generate demand in the domestic market and this has the potential of not only creating opportunities for exporters to sell more in India to cater to this increased demand.

Further, the ministry has prepared a phased export diversification framework in response to US tariffs, mapping critical HS (harmonised system) codes, clusters, and alternate markets.

This strategy is two-pronged - scaling up exports to existing markets like the EU, UK, UAE, Japan, Canada, and Australia; and entering new and untapped markets in Latin America, Africa, Eastern Europe, and East Asia.

"The Government of India is proactively responding with a timely, well-calibrated, and comprehensive multi-tiered strategy designed not only to safeguard Indian exporters but also to strengthen our long-term competitiveness in global markets," the official said.

The USA's 50 per cent tariffs on a wide range of Indian-origin products may affect almost USD 49 billion worth of exports to America, which is over 55 per cent of India's shipments to this market.

While India's overall trade exposure to the US is around 18-20 per cent of merchandise exports, the dependence in certain sub-sectors is high (for example, 60 per cent of carpets, 50 per cent of made-ups, 30 per cent of gems and jewellery, and 40 per cent of apparel exports are destined for the USA).