R. Suryamurthy
With India’s exports facing a projected 30% decline due to new U.S. tariffs, a trade think tank has outlined an urgent, five-point action plan for the government to stabilize and future-proof its trade strategy. The Global Trade Research Initiative (GTRI) warns that the tariffs will hit labour-intensive sectors the hardest, placing India at a serious disadvantage compared to its regional rivals.
The report details the significant impact on Indian exports, noting that competitors like Vietnam, Bangladesh, and Mexico face lower or zero duties. To combat this, GTRI has recommended a targeted strategy focused on immediate financial relief for exporters and long-term structural reforms.
Here is what the GTRI report says India needs to do Financial Relief for MSMEs: GTRI is urging the government to revive the Interest Equalisation Scheme, which was discontinued last year. The report recommends a relaunch with an annual budget of ₹15,000 crore and a five-year commitment. This would provide subsidized credit to exporters, especially MSMEs, lowering borrowing costs and improving their immediate competitiveness.
Real-time Trade Intelligence: The report highlights a critical need for a helpdesk, both digital and phone-based, to provide exporters with real-time information on tariffs, documentation, and regulatory barriers in key markets. It notes that current trade dashboards are often outdated or too complex for smaller exporters, putting them at a disadvantage in a rapidly changing global landscape.
Strategic Use of FTAs: While the government is encouraged to quickly implement the recently signed India-UK free trade agreement and fast-track talks with the EU, the report cautions against overly optimistic expectations. It points out that with average tariffs already low and over half of Indian exports entering duty-free, marginal reductions may not lead to significant export gains.
Reforming Tourism as a Strategic Export: GTRI recommends that the government re-imagine inbound tourism as a major source of export earnings and job creation. The report highlights that India earned only $17 billion from foreign tourists in 2023—a figure far below its potential—due to issues such as high hotel taxes, visitor harassment, and predatory taxi practices. Addressing these issues could unlock massive untapped economic value.
Onboarding New Exporters: The think tank urges the government to operationalize a National Trade Network to simplify the compliance and onboarding process for new exporters. A seamless system, it argues, could bring over 200,000 new firms into the global trade ecosystem and help diversify India’s export base, making it less dependent on any single market.
The GTRI’s recommendations come as several key sectors, including garments, jewellery, and seafood, face steep tariff increases that could make their exports unviable. The report warns that the higher costs could also curb demand for Indian metals and engineering goods from U.S. buyers, further compounding the challenge for India’s exporters.