Govt prepares 'immediate relief measures' to mitigate US tariff stress

In response to the 50 per cent tariffs imposed by the United States (US) on several Indian products, the government has prepared “immediate relief measures” to ensure liquidity support, maintain production and jobs, provide flexibilities in Special Economic Zones (SEZ), and promote targeted import substitution, according to sources in the government.

 

Exporters are expected to encounter delayed payments, stretched receivable cycles, and cancelled orders due to the tariff shock. To mitigate working capital stress and protect jobs, the Centre is considering steps to ease liquidity constraints, prevent insolvencies, and allow exporters to sustain operations until new markets are tapped, they told Business Standard.

 

 

Since another key concern is drop in export orders, especially from SEZ units, the government will launch schemes that will enable interest subvention, factoring, collateral support, export compliance support, branding and packaging support, logistics and warehousing assistance, especially focusing on MSMEs, they said.

 

India is currently facing a major challenge following the imposition of 50 per cent tariffs by the US, with India’s overall trade exposure to the country at around 18–20 per cent of merchandise exports. Dependence in certain sub-sectors, however, is  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 department of commerce calculations.

 

The US administration imposed a 25 per cent reciprocal tariff from August 7 and an additional 25 per cent kicked in from August 27, blaming New Delhi’s Russian crude oil purchases. The steep tariff imposed on India affects almost $49 billion worth of exports to the US or more than 55 per cent of India’s shipments to this market, according to the department’s calculations.

 

Reduction in the number of tax slabs under GST and shifting more goods to lower tax brackets is also expected to boost domestic demand, which could offer exporters alternate sales avenues.

 

While the government believes exports are critical, India isn't an export-oriented nation, but a domestically anchored economy. During FY25, merchandise exports worth $438 billion accounted for 10.4 per cent of the GDP and with limited value addition in some sectors.

 

Sources said that there’s a “temporary stress” due to tariff escalations, but India is “fully prepared” and actively responding with a multi-tiered strategy. In the medium term, India’s focus will shift towards leveraging India’s free trade agreements (FTAs), intensifying buyer–seller outreach, and strengthening GST reforms to enhance competitiveness. In the long term, the government plans to build a diversified, and globally competitive export base, SEZ reforms, and supply chain resilience initiatives.

  The measures will ensure that Indian exporters are not only cushioned against “immediate shocks”, but will be supported to shift to alternate markets and scale competitively, the source said.