India draws up plan to push exports, cushion tariff blow
The government may “frontload” the mission with measures worth ₹10,000 crore to provide immediate support to exporters hit by tariffs
NEW DELHI: The Union cabinet may soon consider a five-year export-promotion mission which will also have the immediate aim of cushioning key sectors hit by the US’s 50% tariffs, for which inter-ministerial consultations were concluded recently, three government officials said.
The multi-dimensional programme to boost exports is likely to have both fiscal and non-fiscal measures, including sector-specific strategies, ease of compliance and trade-facilitation measures, the officials added, requesting anonymity.
According to draft proposals reviewed by HT, relief measures to boost outbound shipments, especially of farm and marine products, will include injecting liquidity into small and medium businesses through cheaper credit and subsidized interest rates. Small and medium enterprises account for nearly 46% of exports.
To fund the support measures, the government is likely to utilise ₹25,000 crore set aside in this year’s Union budget for a plan to boost exports.
The government may “frontload” the mission with measures worth ₹10,000 crore to provide immediate support to exporters hit by tariffs, one of the officials said. Frontloading refers to a strategy of allocating a higher share of funds upfront at the beginning of a programme’s implementation.
The US and India have re-engaged to revive negotiations for a trade pact, with a round of meetings slated for this week in New Delhi.
A visiting US negotiating team led by Brendan Lynch, assistant trade representative for South and Central Asia, arrived in the national capital on Monday. If the two countries manage to converge, then it could pave the way for a sixth round of formal negotiations for a bilateral trade agreement.
The mission will also seek to bridge the export-financing gap, created by the lack of adequate amounts of credit. In the last financial year, export financing stood at about $124.7 billion against a total requirement of $283 billion for exports valued at $437 billion in 2023-24, according to the Center for the Study for Finance and Economics, a wing of the Impact and Policy Research Institute, New Delhi.
The mission will also have fiscal components spread over a five-year period for export promotion, easy credit and incentives, particularly for micro, small and medium enterprises (MSMEs).
According to the officials cited above, the mission is likely to have two sub-schemes. The first, Niryat Protsahan, will likely be an immediate relief package while there will be a longer-term plan called Niryat Disha.
“The Export Promotion Mission was proposed by finance minister Nirmala Sitharaman in the Budget on February 1, hence it is not in response to the US imposing hefty tariffs on Indian goods. But certainly, the mission will also provide immense relief to tariff-hit exporters and help them in expanding and diversifying their exports,” the first official said.
While presenting the Union Budget on February 1, Sitharaman termed exports as one of the growth engines of the Indian economy. “We will set up an Export Promotion Mission, with sectoral and ministerial targets, driven jointly by the ministries of commerce, MSME, and finance. It will facilitate easy access to export credit, cross-border factoring support, and support to MSMEs to tackle non-tariff measures in overseas markets,” she said in her budget speech.
The proposed mission is timely as the US government on July 31, imposed a 25% reciprocal tariff on Indian shipments to America, effective from August 7. Later, on August 6, President Donald Trump signed another executive order imposing a 25% punitive tariff on India effective from August 27 for purchasing Russian crude, taking up total effective US taxes on Indian shipments to 50%, the highest among all countries.
The second official said the export mission will be more “flexible and nimble” in approach and its fiscal impact could be more than the estimated ₹25,000 crore, as it would cover a five-year period.
“The mission will be driven by the ministries of commerce, micro, small and medium enterprises, and the finance ministry to mainly augment export competitiveness,” the first official said.
