 "A man reads The Times of India newspaper, with the lead story on US tariffs on most Indian goods, in the old quarters of Delhi. File image/Reuters")
Trump’s tariffs. It’s the one thing that everyone is talking about after the US president’s 50 per cent levies came into effect, starting Wednesday (August 27). Washington has imposed a 25 per cent reciprocal tariff on imports from India, followed by another 25 per cent penalty tied to India’s Russian oil purchases.
But New Delhi continues to be unphased by Trump’s trade actions as well as the rhetoric from his advisers and supporters.
In fact, it has been devising methods and plans to ensure that its exporters are protected from consequences that may emerge as a result of the sharp tariffs.
What is the Modi government’s big plan to counter US tariffs? Will it help exporters? Here’s what we found out.
A relief package in the works
Following Trump’s tariffs kicking in, the Federation of Indian Export Organisations (FIEO) and other Indian officials called on the Modi government to protect livelihoods (and) reinforce global trade links to offset the impact of the levies.
FIEO president Subhash Chandra Ralhan urged the government to offer short-term relief measures, including a 12-month moratorium on repayment of loans and a 30 per cent automatic enhancement of the Emergency Credit Line Guarantee scheme.
On Thursday (August 28), Finance Minister Nirmala Sitharaman told a trade delegation that the government would extend comprehensive support to exporters to sustain growth momentum. She underscored “the importance of protecting workers’ livelihoods, calling upon industry leaders to reassure employees of job continuity even amidst global headwinds,” said a statement by the Federation of Indian Export Organisations (FIEO).
And now a Commerce Ministry official has said that they have finalised a proposal that would help Indian exporters and have sent it to the Finance Ministry for consideration. The relief package is designed to give exporters a combination of incentives, policy support and targeted interventions to help them overcome the volatility in global trade.
“We have sent the proposal to the finance ministry, and it is now awaiting clearance from the Expenditure Finance Committee (EFC) before being placed before the Union Cabinet for approval,” the official said as per a Mint report.
The official added that the government is trying to speed up the rollout of the export promotion mission and expediting the e-commerce export hub scheme. The mission envisages support worth about Rs 25,000 crore over six years from 2025 to 2031. It will be implemented through two sub-schemes — Niryat Protsahan, with an allocation of over Rs 10,000 crore, and Niryat Disha, with over Rs 14,500 crore.
An official also told The Indian Express that the industry has sought measures similar to those announced during the Covid-19 period. “The government is seized of the issue and there is very positive work going on. The issue of liquidity and how to address it is on the agenda,” he was quoted as telling the Indian daily.
The government has also extended the exemption on cotton import duty until December 31, a move that would help the Indian textile industry place long-term cotton import orders. A press release read, “To augment availability of cotton for the Indian textile sector, the Central Government had temporarily exempted the import duty on cotton from 19th August 2025 till 30th September, 2025.
“In order to support exporters further, the Central Government has decided to extend the import duty exemption on cotton (HS 5201) from 30th September 2025 till 31st December 2025,” it stated.
GST reforms
Another way that India is looking to offset the impact of Trump’s tariffs is the reforms in the GST structure . On August 15, Independence Day , Prime Minister Narendra Modi said that the country would witness “next-generation” reforms in Goods and Services Tax (GST) by Diwali. Under this, the current four GST slab rates will be reduced to two — five per cent and 18 per cent. Goods that fall into the current 12 per cent and 28 per cent brackets will be pushed into these lower slabs.
The GST reforms are expected to boost domestic consumption by leaving more money in people’s pockets, by lowering tax rates on essential goods. The GST cuts will give a fillip to the GDP growth by 0.6 per cent as per estimates, softening some of the tariff blow. In fact, an SBI Research Report noted that the proposed GST reforms would enhance consumption by Rs 1.98 lakh crore.
BMI, a Fitch Solutions Company, also noted that the proposed GST reforms would boost consumption and could cancel out the impact of 50 per cent tariffs by the US. The firm added that “depending on the specifics, the GST reform could cancel out the drag on growth from the tariffs. Given that the details have yet to be confirmed, we highlight the GST reform as a slight upside risk to our growth forecast for now”
India looking at trade diversification
In 2024, a whopping 18 per cent of all Indian goods were exported to the US, which highlights just how much the two countries trade with one another. However, with Trump’s tariffs kicking in, India is now pushing forward with a diversification plan, as it realises the peril of placing all eggs in one basket.
India is planning dedicated outreach programmes in 40 countries, including the United Kingdom, Japan, and South Korea, to push textiles. Other nations include Germany, France, Italy, Spain, the Netherlands, Poland, Canada, Mexico, Russia, Belgium, Turkey, the United Arab Emirates, and Australia.
As Economic Times reported that India already exports to over 220 countries, but the 40 importing countries hold the real key to diversification. Together, these 40 countries represent more than $590 billion in textile and apparel imports, offering vast opportunities for India to enhance its market share.
American economist Jeffrey Sachs also noted that India could offset the impact of the tariffs by strengthening ties with emerging economies and even consider joining regional trade blocs like the Regional Comprehensive Economic Partnership (RCEP).
“I think Trump is shooting — I won’t say himself in the foot — he’s shooting America in the foot. He’s making it less prosperous and less competitive, but he is effectively uniting the rest of the world in closer relations,” Sachs told India Today in an interview.
It appears that India is in no mood to relent to Trump. As PM Modi earlier said, “Aaj duniya me arthik swarth wali rajniti (hai), sab koi apna karne me lage hain. Usse hum bhali bhanti dekh rahe hain (Today in this world, there is politics of economic self-interest, everyone looks out for themselves. We are witnessing this).
“From the soil of Ahmedabad, I wish to tell you, promise you from the land of Gandhi, that the interests of small entrepreneurs, shopkeepers, farmers and livestock rearers are of utmost priority for Modi… Dabav kitna hi kyun na aaye, hum jhelne ki apni takat badhate jayenge (No matter how much pressure comes, we will keep increasing our strength to withstand it),” he added.
With inputs from agencies