US tariffs may cut India growth by 0.5%: Ex-commerce secretary G K Pillai

A steep 50 per cent tariff imposed by the US on shipments from India would have a very small impact on India's economic growth of about 50 basis points if exporters are unable to find alternative markets, former Commerce and Home Secretary G K Pillai said on Thursday.

Terming the steep tariff imposed on India as discriminatory, he said others like China and many European nations also import energy from Russia, but the US has not imposed a penalty against them.

"Impact of the US tariffs on India would be very small, say about 0.5 per cent, but it is going to affect labour-intensive sectors like textiles, gems and jewellery, seafood exports, chemicals, and so on," he said at an event here.

"At least for 3-6 months, the profitability of Indian companies will come down. Some companies will be forced to lay off workers but I am sure that the government will take steps to see that this is mitigated," he said.

The government needs to take some steps to help exporters and industries to tide over the problem and they are incentivized to find new markets and new business models, he suggested.

"I think the government is in the process of working on something. These tariffs have just come into effect only yesterday. So, we will see in the next few weeks what measures the government takes to ensure that labour-intensive sectors are not affected," he said.

The steep 50 per cent tariff on Indian goods entering the US, which came into effect from August 27, would impact exports worth more than $ 48 billion.

The sectors which would bear the brunt of the high import duties imposed by the Trump administration include textiles/ clothing, gems and jewellery, shrimp, leather and footwear, animal products, chemicals, and electrical and mechanical machinery.

The immediate impact of recent US tariffs on Indian exports may appear limited but their secondary and tertiary effects on the economy pose challenges that must be addressed, the finance ministry said in a report on Wednesday.

Ongoing India-US trade negotiations are critical in addressing these issues including the secondary and tertiary effects of high tariff by the US on Indian goods, the monthly economic review released by the ministry said.

In line with the global shift towards diversification and strategic realignment, it said, India is actively pursuing a diversified trade strategy to sustain its resilient trade performance.

"This includes the recently concluded FTA with the UK and EFTA and ongoing FTA negotiations with the US, EU, New Zealand, Chile, and Peru. But, these initiatives will take time to show results and may not fully address the shortfall in exports to the US that may arise if the current tariff rates on India persist," it said.