Mint Explainer | Why India’s tariff-hit exporters need urgent help
Despite a 50% tariff by the US, India’s merchandise exports have stayed resilient on the surface. But under the hood, falling shipments to America, rising working capital needs, and credit curbs are testing exporters’ limits.
At a macro level, merchandise exports are holding up despite the stinging 50% tariff imposed by the US—India’s largest trading partner. But a closer look at the numbers reveals growing concerns that could worsen without an immediate support package for affected exporters. Mint explains.
How are merchandise exports faring?
In September, the first full month after US President Donald Trump imposed the punitive 50% tariff on Indian goods, merchandise exports grew 6.7%, similar to the growth seen in August.
For the first six months of the current fiscal (April-September 2025), exports stood at $220 billion, compared to $214 billion in the same period last year. This resilience has been made possible largely through the diversification of export destinations.
Which are the other markets exporters tapped?
Exporters have widened their reach considerably. In September, exports to Spain surged 151%. Other key markets such as Egypt (67%), China (34%), Bangladesh (23%), Hong Kong (18%), and the UK (12%) also recorded strong growth.
How are exports to the US impacted?
Quite badly. In September, exports to the US fell 12%, marking the fourth consecutive month of decline. According to the Global Trade Research Initiative, a think tank, cumulative exports to the US have dropped an estimated 37.5% over the last five months.
The US share in India’s total exports consequently fell from 24% in June to 15% in September. Labour-intensive sectors such as textiles, gems and jewellery, chemicals, and machinery, which together account for 60% of India’s exports to the US, have been hit hard, with their exports falling 33%. The decline in shipments to the US alone shaved 4.2 percentage points off India’s overall export growth in September.
Is a relief package a fair demand?
Absolutely, say exporters. They argue that this crisis is not of their making but the result of factors beyond their control. A support package, similar to the one announced during the Covid pandemic, is, therefore, essential to help them tide over the current disruption.
They point to Brazil, which rolled out a $15.5 billion relief package for its exporters within 15 days. In India, most exporters in sectors like textiles are small players who cannot absorb the additional costs imposed by the tariffs.
What do exporters want?
In multiple meetings with the government, exporters have sought some form of handholding until the tariffs are rolled back, which they hope will happen once a new bilateral agreement with the US is signed.
Working capital needs have spiked, prompting demands for soft loans. However, the opposite seems to be happening: with several export-oriented sectors now classified as “red" (very risky), banks are tightening lending norms. Exporters also want the rules for non-performing asset (NPA) classification to be relaxed so that their accounts are not marked as bad debts.
What happens otherwise?
Without timely support, exporters risk losing their foothold in the US, a market that is lucrative in both volume and pricing terms. Other destinations can offset the loss only to a limited extent. That is why, despite the tariffs, many exporters continue to ship goods to the US to retain customers acquired with great difficulty.
US buyers are sharing some of the additional costs for now, but this may end once the Christmas and New Year orders are fulfilled. Since several of the affected sectors are labour-intensive, prolonged distress could lead to job losses and trigger a cascading effect across the broader economy.
topics
