Indian exporters seek government's help as Trump tariffs take effect
What's the story
The Federation of Indian Export Organisations (FIEO) has expressed deep concern over the US government's decision to impose an extra 25% tariff on Indian-origin goods. The move, effective from today, raises total duties on several export categories to as high as 50%. This is expected to severely impact India's exports to the US, its largest export market.
Impact assessment
Nearly half of India's exports to be impacted
The new tariff regime will impact nearly half of India's exports, worth $87.3 billion. The sectors likely to be affected include textiles, apparel, gems and jewelry, seafood, leather goods as well as steel and aluminum products. FIEO President SC Ralhan has termed this development a major setback that could severely affect India's competitiveness in the US market.
Competitive edge
Pricing disadvantage for exporters
About 55% of India's exports to the US, worth around $47-48 billion, will now be at a pricing disadvantage of 30-35%. This makes them less competitive than products from China, Vietnam, Cambodia and other Southeast/South Asian countries. Textile and apparel manufacturers in Tirupur, Noida and Surat have already halted production as rising costs are eating into their competitiveness.
Sectoral impact
Seafood industry at risk
The seafood industry, especially shrimp exporters, is staring at serious risks due to the new tariffs. The US accounts for nearly 40% of India's seafood exports, and this tariff hike could lead to stockpile losses, supply chain disruptions, and major distress for farmers.
Relief measures
Exporters demand government intervention
In response to the new tariffs, exporters are mobilizing with a comprehensive wishlist for vital support from the government and Reserve Bank of India (RBI). Their demands include loan repayment relaxation, government-backed loans, interest subsidies as well as aid for employees' provident funds and ESIC. Kirit Bhansali, Chairman of Gems & Jewelry Export Promotion Council has stressed on the need for relief measures given the severity of this situation.
Financial relief
Moratorium on loan repayments sought
The FIEO is advocating a one-year moratorium on both principal and interest payments. They say this would allow exporters to better allocate resources toward diversifying markets, and managing cash flows amid dwindling orders and lengthened payment cycles. Ralhan has warned of an impending crisis that could lead to shutdowns and unemployment in the industry.
Multi-ministry appeal
Apparel Export Promotion Council demands immediate action
The Apparel Export Promotion Council (AEPC) has also raised its voice, seeking assistance from several government ministries including finance, textiles, commerce, labor and environment. They have highlighted the difference in interest rates with Indian rates being 8% to 12% as opposed to only 3% in countries like China and Malaysia. AEPC has proposed reviving the interest subvention scheme, and reintroducing pre-shipment rupee export credit for five years.