India will roll out support packages for exporters facing steep 50% US tariffs, Finance Minister Nirmala Sitharaman announced.
India’s Response to US Tariffs
On Friday, September 5, 2025, India’s Finance Minister Nirmala Sitharaman announced that the government will introduce support packages to assist exporters impacted by the 50% tariffs imposed by the United States on Indian goods. Speaking to India Today, she reaffirmed the government’s commitment to mitigating the economic fallout from these tariffs, which took effect on Tuesday, August 27, 2025, in response to India’s continued purchase of Russian oil. The announcement follows a series of high-level meetings with exporters and industry bodies, including the Federation of Indian Export Organisations (FIEO), to address concerns over competitiveness and job losses.
Why It Matters
The US tariffs threaten $48.2 billion worth of Indian exports, impacting labour-intensive sectors like textiles, leather, shrimp, and gems, which employ millions across South Asia’s largest economy. This development could disrupt India’s trade surplus with the US, its largest trading partner, and exacerbate economic challenges in export-driven regions like Gujarat and Tamil Nadu.
Impact of US Tariffs on Indian Exporters
The US tariffs, comprising a 25% base rate and an additional 25% penalty for India’s Russian oil purchases, affect approximately 55% of India’s $86.5 billion merchandise exports to the US in 2024-25. Sectors such as textiles, leather footwear, shrimp, and gems and jewellery face significant challenges, as their goods are now less competitive compared to those from countries like Bangladesh, Vietnam, and Thailand, which face lower tariffs. For instance, an Indian-made shirt that once sold for $10 in the US now costs $16.40, compared to $12 from Vietnam, according to trade experts.
“The new tariff regime is a strategic shock that threatens to wipe out India’s long-established presence in the US,” said Ajay Srivastava, founder of the Global Trade Research Initiative. Exporters like Puran Dawar, a leather footwear manufacturer in Agra, reported a substantial hit to their US business, with clients like Zara pausing orders.
Financial and Policy Support
Sitharaman’s announcement builds on earlier assurances given during a meeting with an FIEO delegation on Thursday, August 28, 2025. She emphasized protecting workers’ livelihoods and urged industry leaders to ensure job continuity. The government is exploring financial incentives, including favourable bank loan rates and a potential moratorium on loans, to ease liquidity constraints. Additionally, the Commerce Ministry is fast-tracking an export promotion mission worth INR 25,000 crore over six financial years (2025-2031), comprising two sub-schemes: Niryat Protsahan (INR 10,000 crore) and Niryat Disha (INR 14,500 crore).
Market Diversification
To counter the tariffs’ impact, the government is pushing to diversify export markets, focusing on Latin America, Africa, and Southeast Asia. Trade negotiations with the European Union have gained urgency, and the Commerce Ministry is holding consultations to explore new free trade agreements (FTAs). On Wednesday, September 3, 2025, Commerce Minister Piyush Goyal will meet exporters to discuss strategies, including easing norms for Special Economic Zone (SEZ) units and promoting e-commerce exports.
Tax and Economic Measures
Prime Minister Narendra Modi has promised tax cuts and a simplified two-tier GST system to boost consumption, which contributes nearly 60% to India’s GDP. These measures, combined with a 1% interest rate reduction by the Reserve Bank of India, aim to spur lending and support small businesses affected by the tariffs. The government has also extended import duty exemptions on cotton until Sunday, December 31, 2025, to bolster the textile industry, which employs over 45 million people.
Challenges and Industry Response
Exporters have raised concerns about immediate challenges, including a slowdown in US orders and potential job losses. FIEO President S.C. Ralhan described Sitharaman’s assurances as a “great source of confidence,” emphasizing the need for quick policy measures to maintain competitiveness. Industry groups have proposed reviving the Merchandise Exports from India Scheme (MEIS), suggesting that the government and exporters share the tariff burden to reduce the effective rate to 20%.
However, some analysts remain skeptical about the sufficiency of these measures. “Even if subsidies are provided, it won’t be enough to cushion such a huge hit,” said M.K. Venu, founding editor of The Wire, highlighting the lack of clarity on funding sources.
Background
The US tariffs stem from President Donald Trump’s executive order on August 27, 2025, doubling the initial 25% tariff due to India’s purchase of Russian oil, which the US claims funds Russia’s war in Ukraine. India has defended its energy imports, citing the needs of its 1.4 billion population. Five rounds of trade talks between India and the US have failed to yield a deal, with agriculture and dairy access remaining key sticking points.
What’s Next
The Indian government’s support packages for exporters facing US tariffs will be crucial in maintaining economic stability. As Commerce Minister Goyal’s meeting on September 3, 2025, approaches, exporters await concrete measures to navigate this trade crisis. The focus on market diversification and domestic consumption will shape India’s response to the US tariffs in the coming months.
Published in SouthAsianDesk, September 5th, 2025
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