In a development that could significantly reshape India’s export landscape, the Indian government is reportedly considering a comprehensive incentive package to support domestic exporters following the United States’ decision to double import tariffs on a range of goods. According to senior officials familiar with the matter, the move is aimed at cushioning the impact of rising trade barriers and safeguarding India’s outbound trade amid a shifting global trade environment.
US Tariff Shock: A Sudden Blow to Indian Exporters
Sources within the Ministry of Commerce and Industry have confirmed that the US administration has doubled tariffs on select categories of goods — including textiles, electronics components, steel products, and certain chemicals — as part of its broader protectionist push under new trade guidelines.
For India, which exports billions worth of these products to the US every year, the revised duties pose a serious threat to competitiveness, especially for small and mid-sized exporters who operate on thin margins.
An official familiar with the situation said:
“The US tariff hike has come at a sensitive time. Indian exporters are already battling global inflation, high freight costs, and weakening demand. These new duties can dent our market share if immediate corrective action is not taken.”
Government’s Response: Incentives, Subsidies, and Trade Recalibration
In response, the Indian government is actively evaluating a series of targeted relief measures, aimed at helping exporters retain their foothold in the US market while also diversifying export destinations. Some of the proposals reportedly under discussion include:
1. Enhanced MEIS/RODTEP Benefits
The government is looking to expand the scope of the Remission of Duties and Taxes on Exported Products (RODTEP) and Merchandise Exports from India Scheme (MEIS) for affected sectors. This would help neutralize the cost impact of US tariffs and make Indian goods price-competitive again.
2. Interest Subvention for Export Loans
To ease the liquidity crunch, the Centre may offer additional interest subvention (discount) on export-related credit, especially for MSME exporters dealing in affected product categories. This would lower borrowing costs and support working capital.
3. Export Insurance and Risk Mitigation
Strengthening the Export Credit Guarantee Corporation (ECGC) framework is also on the table. Enhanced credit insurance could provide a safety net for exporters facing payment delays or defaults due to volatile market conditions in the US.
4. Freight Subsidies and Logistic Support
The Commerce Ministry is evaluating proposals to subsidize high shipping and logistic costs for US-bound shipments. Additionally, trade promotion councils are expected to be roped in to coordinate efforts for alternative market access in Europe, Africa, and Southeast Asia.
5. FTA Acceleration with Other Markets
To reduce over-reliance on the US, the government is expected to fast-track pending Free Trade Agreements (FTAs) with the EU, UK, and Gulf countries, opening new tariff-free routes for Indian exports.
Sectoral Impact: Who’s Feeling the Heat?
The sectors hit hardest by the US tariff hike include:
- Textiles & Apparel: One of India’s largest export segments to the US, facing tough competition from Vietnam and Bangladesh.
- Engineering Goods: Components and machinery exporters are now looking at slimmer margins.
- Chemicals & Pharmaceuticals: While India holds strong in generics, tariff hikes on intermediate goods could impact the supply chain.
- Steel and Aluminium: Already impacted by global demand fluctuation, these sectors now face a stiffer challenge.
Exporters from Ludhiana, Surat, Tirupur, and Rajkot have begun lobbying industry bodies for immediate government intervention.
Manish Kumar, an auto components exporter from Pune, said:
“With the new US duties, we are looking at a 12–15% hit on our prices. Either we pass this on to buyers and risk losing contracts, or we absorb it and cut into our already slim profits. Government support is now crucial.”
Political and Diplomatic Calculations
While the government’s response appears swift, diplomatic engagement with the US is also underway. India is expected to raise the issue through formal trade dialogue channels, including the India-US Trade Policy Forum (TPF) and the World Trade Organization (WTO), to seek clarity and relief on certain categories.
Sources suggest the Ministry of External Affairs and Ministry of Commerce are coordinating to ensure that trade does not become a casualty of geopolitical shifts. With the US tightening its domestic trade policies ahead of elections, India is treading cautiously while pushing for exemptions where possible.
A Wake-Up Call for Export Strategy?
Experts argue that while the tariff hike is a temporary setback, it also exposes India’s over-dependence on a few key markets. Nearly 17% of India’s exports head to the US, and the shock is a reminder of the need to diversify risk and move up the value chain.
Trade expert Dr. Ritu Sharma notes:
“India must turn this challenge into a strategic pivot — focusing on product innovation, new FTAs, and deeper trade ties with emerging economies. The quick response by the government is encouraging, but a long-term shift is needed.”
Conclusion: Balancing Resilience with Opportunity
As the world’s trade corridors grow more volatile and inward-looking, India’s exporters are increasingly at the mercy of global policy shifts. The US tariff hike is a significant blow, but the Indian government’s proactive stance on incentives and structural support shows a readiness to shield its exporters and recalibrate trade priorities.
If implemented quickly and effectively, these proposed incentives could not only mitigate short-term losses but also set the stage for a more resilient, diversified, and competitive export ecosystem in the years ahead.
The message is clear: India’s exporters will not be left to weather this storm alone.
