When tariff walls become a ladder

Tariffs, wars and global disorder are forging a more resilient India Inc

India is roughly 3 per cent of global gross domestic product (GDP) but nearly 20 per cent of its population. The arithmetic carries a hard truth: India’s next phase of growth cannot rely on the domestic market alone. It must win market share abroad by building businesses that can dominate internationally.

 

Paradoxically, Donald Trump’s trade offensive may, in fact, be helping. Corporate India is increasingly choosing grit over grievance. Exporters are taking the shock on the chin, not treating trade friction as an impassable wall, but as a mirror reflecting the need for structural reform. This baptism by trade fire is accelerating a long-overdue shift from cheap volume arbitrage towards complex manufacturing, scalar capabilities, research & development (R&D) and potentially towards proprietary brands.

 

The petroleum-refining sector that prompted US Secretary of State Marco Rubio to call India a “refining superpower” is a case in point. It illustrates resilience through scale, sophistication and market optionality. With capacity of roughly 258 million tonnes a year, and output capable of running above nameplate capacity, India imports crude, adds value through complex refining, and exports diesel, petrol, aviation fuel and naphtha to markets including the EU and even Russia. Redirecting cargoes while meeting domestic demand has strengthened energy security, foreign-exchange earnings and India’s ability to absorb geopolitical disruption.

 

Pharmaceuticals also show the stakes. Washington’s proposed framework — a phased duty of 100 per cent on imported generic medicines, escalating to 200 per cent  — strikes at the economics of an industry that sells 41 per cent of its generic-formulation exports to the US market. Yet, Indian drugmakers are not abandoning the world’s largest health care market. The tariff threat has made the shift from commodity generics to high-value innovation a corporate imperative.  Sun Pharma’s $11.8-billion acquisition of Organon; Lupin’s commitment of $250 million in Florida to local manufacturing and R&D are recent examples. Of about $20.5 billion in US investment pledges announced by Indian leaders at the SelectUSA summit, $19 billion came from pharma. The model is moving from exporting to onshore, high-value manufacturing and speciality drugs.

 

Clean energy tells a similar story. When the US imposed a preliminary 126 per cent countervailing duty on Indian solar-cell imports, the companies did not shrink capacity. They redirected volumes towards Europe and West Asia, while using the production-linked incentive scheme to move into high-efficiency modules. Rather than remain dependent on raw cell exports, firms are climbing the supply chain through module assembly and local manufacturing abroad.

 

In the second quarter of 2026-27, export performance reinforces the broader point. Merchandise exports rose 18 per cent year-on-year (YoY) to $260 billion, one of the fastest increases since 2023, while goods-and-services exports increased 14 per cent to $476 billion. Petroleum-product exports rose 32 per cent YoY in September, keeping up its stellar growth rate through first half of the year. True, there is an element of higher prices accounting for a bulk of this growth, as against volume increase. Total exports expanded from $498 billion in FY21 to a record $863 billion in FY26, with a significant pivot from agricultural commodities, gems and textiles towards technology-intensive production and specialised services.

 

Importantly, the export basket now looks materially different. Electronics that clocked 70 per cent YoY growth in September rose from $11 billion in FY21 to $48 billion in FY26, lifting its share in merchandise exports from a low single-digit to 10.8 per cent. Engineering goods exceed 26 per cent of shipments, helping push non-petroleum exports to $388 billion.

 

The $421-billion services sector is moving beyond routine IT support into consulting, finance and engineering design. Threats of border taxes on cross-border data flows and tightening visa rules are dismantling the legacy business model of cheap headcount arbitrage. The industry heavyweights are transforming offshore delivery centres into specialised hubs dedicated to enterprise AI, Cloud architecture, and cybersecurity, embedding themselves deeply into global corporate infrastructures.

 

 To hedge against single-market regulatory shocks, tech giants are simultaneously expanding nearshore delivery networks across Latam and Eastern Europe. EU exports reached $86 billion, with deeper reach into France, Italy and the Czech Republic. New corridors across West Africa and Southern Africa are carrying pharmaceuticals, automobiles and industrial machinery. Trade deals, commercial diplomacy and China+1 realignments are reinforcing this shift. Agreements with the EU, the UK, Australia, New Zealand and Oman widen preferential access for goods and open channels for services.

 

But tariffs do not automatically create competitiveness. They can destroy margins, displace workers and expose weak balance sheets. India must use external pressure to accelerate reforms it needed anyway — namely, lower logistics costs, predictable regulation, reliable infrastructure, deeper skills and patient capital.

 

The American tariff offensive was meant to assert leverage and pull supply chains home. It is instead hastening the growth and industrial evolution of America’s most consequential democratic global partner. For India, doubling from 3 per cent of global GDP and ultimately to 10 per cent, will require more than merely exporting more; it will require creating capabilities and franchises the world cannot easily replace.

 

Indian enterprise should trade volume for value — and policymakers must sustain a diversified, multipolar trade architecture. The ultimate irony will then be clear: Protectionism intended as a wall will have become a ladder, lifting a more resilient India, even if belatedly, towards the centre of global commerce.       

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The writer is group chief economist, L&T. The views are personal