Govt may line up four schemes to soften Donald Trump's tariff blow

Cabinet likely to take up proposal on Wednesday

The government is likely to announce up to four schemes, including credit-related support measures, to help exporters hit by the 50 per cent punitive tariff imposed by the Donald Trump administration on Indian-origin products.

 

“The Cabinet may take up the proposal on Wednesday. It will be in line with the credit guarantee schemes announced during the Covid period, especially for the micro, small and medium enterprises (MSMEs),” a government official said, requesting anonymity.

 

The measures are expected to tackle liquidity challenges faced by small exporters in labour-intensive sectors, ease pressure on working capital, protect jobs and enable firms to sustain operations until new markets are found. Among the most vulnerable are textiles and apparel, gems and jewellery, leather and footwear, chemicals and engineering goods, and agriculture and marine exports.

 

Against this backdrop, Prime Minister Narendra Modi on Tuesday underlined India’s resilience, noting that GDP grew 7.8 per cent in the first quarter of FY26 despite global uncertainties and “aarthik swarth se paida hue chunautiya (challenges driven by economic self-interest)”. Speaking at the Semicon India 2025 conference, he said growth had “outperformed every expectation, every estimate, and every forecast”. Trump had earlier dubbed India a “dead economy”. 

 

In May 2020, in the midst of the Covid-triggered economic disruption, Union Finance Minister Nirmala Sitharaman had announced a relief package under the Atmanirbhar Bharat Abhiyan. As part of the package, the government unveiled a ₹3 trillion Emergency Credit Line Guarantee Scheme (ECLGS) to provide working capital support to businesses, including MSMEs. These loans carried a 100 per cent government guarantee and required no collateral from borrowers.

 

In addition, the government announced a ₹20,000 crore subordinate debt scheme for stressed MSMEs. The Centre committed ₹4,000 crore to the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE), enabling banks to extend loans to promoters of such units, up to 15 per cent of their stake in the business, subject to a maximum of ₹75 lakh. The package also provided for the creation of a Fund of Funds with a corpus of ₹10,000 crore to offer equity support to growth-oriented MSMEs.

 

India is currently facing a major challenge following the imposition of 50 per cent tariffs by the US, with overall trade exposure to that country at around 18–20 per cent of merchandise exports. Dependence in certain sub-sectors, however, is far higher -- 60 per cent of carpets, 50 per cent of finished or semi-finished textiles, 30 per cent of gems and jewellery, and 40 per cent of apparel exports are shipped to the US, according to commerce department estimates.

 

The Delhi-based think tank Global Trade Research Initiative has calculated that the US tariffs will hit 66 per cent of India’s exports to America worth $86.5 billion, or about $60.2 billion in goods facing higher duties.

 

Commerce and Industry minister Piyush Goyal will meet exporters on Wednesday to hear their concerns over the tariff-related challenges.

 

The government is also considering an Export Promotion Mission (EPM) under which various support schemes may be rolled out, aimed at stabilising export orders and enabling better utilisation of idle capacity. The EPM was announced in the FY26 Budget and is currently under appraisal by the Expenditure Finance Committee in the finance ministry.

 

“The finance ministry is yet to approve the EPM and has raised concerns and queries regarding some of the schemes that have been proposed. We are waiting for the final approval from the Cabinet because after that it will take time to formulate the rules and implement the schemes,” said the official cited above.

 

The broader aim is to support small exporters and labour-intensive sectors by addressing both financial and non-financial bottlenecks. The mission focuses on trade finance access through interest subvention, factoring, e-commerce export cards, and collateral support. It also envisages wider market access through compliance support, branding and packaging assistance, logistics and warehousing support.

 

“It (EPM) may take some more time. The officials were busy with work related to the Goods and Services Tax reforms,” said a finance ministry official.