US tariffs: India expects negotiations to continue; support package for domestic industry, exporters likely

The government expects negotiations with the US to continue in the coming months, said sources, despite a sharp downturn in the ties between New Delhi and Washington.

However, with domestic industry and exporters facing the brunt of the 50% tariffs on India, sources indicated that some support would be provided to help them tide over the current challenge. The Reserve Bank of India has been holding discussions with exporters and it is expected that some measures by the government could be announced in the coming days.

The Centre is also likely to roll out an Export Promotion Mission shortly with an outlay of Rs 2,250 crore that would have facilities including easy credit for micro, small and medium enterprises, overseas warehousing and global branding initiatives.

The industry has also called for a loan moratorium, interest subsidy, and collateral-free lending are some of the proposals by the industry.

The government will continue to engage with the US to finalise the first tranche of a bilateral trade deal by fall 2025. India remains hopeful of clinching a trade deal with the US in the coming months but is at the same time looking to provide some support to exporters who are feeling the pinch of the 50% tariff.

Meanwhile, the government also remains hopeful that further utilisation of free trade agreements would give some boost to exports and also help diversify markets. The free trade agreement between India and the four-nation European bloc -- European Free Trade Association (EFTA), will also come into effect from October 1, raising the scope for further exports.

While the 25% additional tariffs by the US came into effect on August 27, taking the overall tariff burden on Indian exports to the US to 50%, exporters have said that they stopped receiving orders some time ago. While the US has exempt electronics and pharma exports from the tariff, at stake for India are key exports from sectors including textiles, gems and jewellery and leather. It is expected that about 55% to 60% of India’s exports to the US are now hit by the tariffs with almost nil orders coming in.