India's exporters are facing a critical juncture, and their plea for urgent support is a topic that deserves our attention. The US, India's largest trading partner, has imposed a hefty 50% tariff on Indian goods, and the impact is far-reaching.
While merchandise exports have shown resilience at a macro level, a deeper analysis reveals growing concerns. Mint delves into the numbers to uncover the challenges and potential consequences for India's export industry.
How are India's merchandise exports holding up?
In the first full month after the US tariff imposition, September saw a 6.7% growth in merchandise exports, mirroring the trend in August. This resilience is largely attributed to the diversification of export destinations, with exports totaling $220 billion in the first six months of the current fiscal year (April-September 2025), compared to $214 billion in the same period last year.
Exploring New Markets: A Silver Lining?
Exporters have expanded their reach significantly. September witnessed a remarkable 151% surge in exports to Spain, with other key markets like Egypt (67%), China (34%), Bangladesh (23%), Hong Kong (18%), and the UK (12%) also experiencing robust growth. This diversification strategy has been crucial in maintaining export stability.
The US Market: A Troubling Decline
However, exports to the US have taken a significant hit, falling 12% in September, marking the fourth consecutive month of decline. According to the Global Trade Research Initiative, cumulative exports to the US have dropped an estimated 37.5% over the last five months. This has led to a substantial decrease in the US's share of India's total exports, dropping from 24% in June to a mere 15% in September.
Labour-Intensive Sectors: The Hardest Hit
Labour-intensive sectors such as textiles, gems and jewelry, chemicals, and machinery, which collectively account for 60% of India's exports to the US, have been severely impacted. Their exports have plummeted by 33%, significantly impacting India's overall export growth in September.
Is a Relief Package Justified?
Exporters emphatically argue that this crisis is not of their doing but a result of external factors beyond their control. They draw parallels to the Covid pandemic, emphasizing the need for a similar support package to navigate through this disruption. They highlight Brazil's swift action, rolling out a $15.5 billion relief package for its exporters within just 15 days.
The Plea of Indian Exporters
In various meetings with the government, exporters have sought some form of support until the tariffs are lifted, hoping for a new bilateral agreement with the US to resolve the issue. They emphasize the need for soft loans to meet their working capital requirements, but instead, they face tighter lending norms as several export-oriented sectors are now classified as "red" (very risky) by banks. Exporters also request relaxed rules for non-performing asset (NPA) classification to avoid their accounts being marked as bad debts.
The Potential Fallout: A Cause for Concern
Without timely support, exporters risk losing their foothold in the lucrative US market, which offers both high volumes and attractive pricing. Other destinations can only partially offset this loss. Many exporters continue to ship goods to the US, despite the tariffs, to retain hard-earned customers. While US buyers are currently sharing some of the additional costs, this arrangement may not last beyond the Christmas and New Year orders.
The Human Cost: A Cascading Effect
The prolonged distress in labour-intensive sectors could lead to job losses, triggering a ripple effect across the broader economy. This is a critical issue that warrants immediate attention and action.
And here's where it gets controversial... Should the government intervene with a relief package, or is this a natural consequence of global trade dynamics? What are your thoughts on this complex issue? Feel free to share your opinions and engage in a constructive discussion in the comments section below!
