India's Export Dilemma: Navigating the Tariff Storm
The Trade Turmoil: India's exporters are grappling with a critical situation as the US, their primary trading partner, has imposed a harsh 50% tariff on Indian goods. While overall merchandise exports remain stable, a deeper analysis uncovers a brewing crisis.
Export Performance: In September, following the tariff imposition, merchandise exports surprisingly rose by 6.7%, mirroring August's growth. This six-month fiscal period (April-September 2025) saw exports reach $220 billion, surpassing the previous year's $214 billion. Diversifying export destinations has been a key strategy in maintaining this resilience.
Exploring New Markets: Exporters have successfully ventured into new territories. September witnessed a staggering 151% surge in exports to Spain, while Egypt, China, Bangladesh, Hong Kong, and the UK also experienced significant growth, ranging from 12% to 67%.
The US Trade Slump: However, exports to the US have taken a severe hit, declining by 12% in September, marking the fourth straight month of downturn. The Global Trade Research Initiative estimates a staggering 37.5% drop in cumulative exports to the US over the past five months.
Impact on Key Sectors: Labor-intensive sectors like textiles, gems and jewelry, chemicals, and machinery, which constitute 60% of India's exports to the US, have been particularly affected, witnessing a 33% decline. This has significantly slowed India's overall export growth.
The Case for Relief: Exporters strongly advocate for a relief package, arguing that the crisis is beyond their control. They draw parallels with the Covid pandemic, when a similar package provided crucial support. Brazil's swift $15.5 billion relief for exporters is cited as an example.
Immediate Needs: Exporters, especially in sectors like textiles, are small-scale and struggle with the additional tariff costs. They seek government assistance until the tariffs are lifted, which they anticipate will happen with a new bilateral agreement. They request soft loans to meet working capital demands and relaxed rules for non-performing asset classification to avoid bad debt labeling.
Consequences of Inaction: Without support, exporters face the risk of losing their US market presence, known for its high volume and pricing. Other markets can only partially compensate for this loss. Despite the tariffs, exporters persist in shipping to the US to retain hard-won customers. US buyers currently share the extra costs, but this may change post-holiday season. The labor-intensive nature of many affected sectors raises concerns about potential job losses and broader economic repercussions.
But here's the controversial part: Is the government's response adequate? Should exporters receive more support? Share your thoughts in the comments, and let's explore the complexities of this economic challenge.
