The Indian economy is facing a daunting challenge as the United States, under President Donald Trump’s administration, has imposed a 50% tariff on Indian goods.
This move has sparked widespread concern among traders, exporters, and industry leaders, who fear that the tariffs could devastate key sectors of the Indian economy and put hundreds of thousands of jobs at risk.
Anuj Gupta, a garment accessory exporter based in New Delhi, is among those who are feeling the pinch. With 40% of his business in the US market, Gupta’s operations have been severely impacted.
“The hovering uncertainty in the market has hampered the work badly, leaving a big dent,” he said. Gupta’s experience is not isolated, as many Indian exporters are struggling to cope with the new tariffs.
The tariffs were imposed as a penalty for India’s purchase of Russian oil, which the US sees as financing Moscow’s war in Ukraine.
However, Indian officials have pushed back, pointing out the double standards of the US, which continues to trade with Russia while pressuring India to cut ties.
Five rounds of talks between Washington and New Delhi have failed to yield a trade deal, leaving exporters like Gupta in a state of limbo.
The sectors that are likely to be worst hit by the tariffs include textiles, gems, jewelry, carpets, and shrimp. These industries are not only significant contributors to India’s economy but also provide employment to millions of people.
K Anand Kumar, who manages a shrimp exporting company in Andhra Pradesh, is worried about the future of his business. With over 90% of his company’s cargoes heading to the US market, Kumar fears that the tariffs could lead to a collapse of his business. “We are already laying off because we can’t keep paying salaries with no orders in line for us,” he said.
The Indian government has assured exporters that it will provide support to navigate this crisis. Ajay Sahai, CEO of the Federation of Indian Export Organisation (FIEO), is cautiously hopeful about the government’s intervention.
“The government has fully assured us that they will provide all kinds of support needed to navigate this problem, perhaps including an economic package,” Sahai said. However, the challenge lies in implementing these measures effectively.
The tariffs could have far-reaching consequences for the Indian economy. According to Moody’s Ratings, the tariffs could slow India’s economic growth and severely curtail its ambitions to develop its manufacturing sector.
The much wider tariff gap compared to other Asia Pacific countries could also reverse some of the gains made in recent years in attracting related investments.
“It is like being in a nightmare, where you do not know what new, random tariff number you wake up to next,” Kumar said, highlighting the uncertainty and anxiety gripping the business community.
The Indian government has taken a defiant stance on the trade war with the US. Prime Minister Narendra Modi has emphasized the need for self-reliance and protecting Indian interests.
“India should become self-reliant… Economic selfishness is on the rise globally, and we mustn’t sit and cry about our difficulties,” Modi said in a recent speech.
However, traders fear that they could be left bleeding in the bargain, with some estimating that the tariffs could affect nearly 55% of India’s merchandise exports to the US.
The imposition of 50% tariffs on Indian goods by the US has created a sense of uncertainty and fear among Indian traders and exporters. While the Indian government has assured support, the challenge lies in effectively implementing these measures to mitigate the impact of the tariffs.
As the situation stands, many Indian businesses are bracing for a potential economic nightmare, with hundreds of thousands of jobs at risk.
The coming weeks will be crucial in determining the outcome of this trade war and its impact on the Indian economy.