The Indian government is urgently working on measures to ease the severe liquidity crunch faced by exporters after the United States’ punitive 50% tariff hike on Indian imports came into effect on Wednesday.
Senior officials at the Commerce and Industry Ministry confirmed Thursday that while immediate relief measures are being formulated, broader, long-term strategies are also being prioritized to shield India’s economy from such sudden shocks in the future.
The move by Washington, which comes alongside a 25% additional oil levy, has triggered outrage among Indian exporters who see the tariffs as unnecessarily aggressive and punitive.
This has left industries—from textiles and chemicals to niche manufacturing sectors—scrambling to cope with orders slowing to a trickle, threatening jobs, market access, and supply chain stability.
Government in Crisis Mode, But Focused on Long-Term Resilience
A senior ministry official acknowledged that the government is “seized of the issue” and fully aware of the strain businesses are under.
The industry is staring at a short-term liquidity crisis, and many exporters are completely dependent on the US market.
We are considering relief measures, but not in the form of subsidies. A relief package will come, but it has to be carefully designed to ensure long-term benefits and sustainability,” the official stressed.
The government is studying measures that will enable exporters to sustain operations without resorting to stopgap subsidies, with lessons drawn from past emergency packages rolled out during the COVID-19 pandemic.
Industry Leaders Warn of Deepening Crisis
On Thursday, a delegation from the Federation of Indian Export Organisations (FIEO), led by President S. C. Ralhan, met Finance Minister Nirmala Sitharaman to raise alarm over the economic fallout of Washington’s tariff escalation.
Ralhan cautioned that competitiveness, employment generation, and India’s global trade standing are all at risk if the crisis is not addressed quickly.
In a statement, FIEO emphasized that Indian exporters, who have long been engines of economic growth, are under immense financial and operational strain.
Minister Sitharaman assured the delegation that the government stands firmly with exporters during this period of economic hostility, hinting at policy measures designed to absorb some of the shock.
Calls for WTO-Inspired Schemes and Tariff Sharing
Industry sources suggested reviving schemes akin to the now-discontinued Merchandise Exports from India Scheme (MEIS), which was phased out for failing to meet World Trade Organization (WTO) norms.
With the WTO’s effectiveness in dispute, some exporters believe a revamped MEIS-like scheme is a pragmatic short-term solution.
We have proposed a cost-sharing model where exporters and the government equally absorb a 15% tariff hit each, lowering the effective rate to around 20%.
This would level the playing field with competitors in other regions,” said a senior trade insider.
Negotiations with the US Stalled, but Engagement Continues
Indian officials confirmed that while the much-anticipated trade talks scheduled for August 25 have been postponed, diplomatic engagement continues.
There’s no sense in finalizing a trade deal while punitive tariffs remain. These additional duties must be addressed first, or a deal will be meaningless for Indian exporters,” the official explained.
Trade tensions also featured in the US–India 2+2 Intersessional Dialogue held virtually earlier this week, but Washington has so far shown no signs of easing its stance.
A Harsh Reminder of Trump’s Trade Hostility
This episode underscores former US President Donald Trump’s hardline trade policies, often criticized as weaponized protectionism.
His tariff hikes, framed as measures to protect US domestic industries, have been perceived in India and other nations as acts of economic aggression designed to inflict pain on trading partners for political leverage and self-serving gains.
The Indian government now faces the dual challenge of defending its exporters while also future-proofing its trade strategy against similar shocks.
Officials described the current situation as a “wake-up call” for exporters, urging industries to diversify their markets and reduce overdependence on any single geography.
We must learn to sell more to the world in a diversified manner,” the senior official said, stressing the importance of resilient, self-reliant supply chains.
This unfolding crisis paints a sobering picture: India’s exporters are under siege from external economic hostilities that have disrupted decades of growing bilateral trade ties.
As New Delhi scrambles to protect its industries and workers, Trump’s tariff war serves as a stark reminder that in the global economy, power often trumps partnership, and some leaders take pride in harming others to advance their own interests.
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