India Prepares Measures to Safeguard Exporters Amid US Tariffs, Focuses on Boosting Domestic Demand
The Indian government is taking proactive steps to mitigate the impact of the recent increase in tariffs imposed by the United States on Indian exports. Economic Affairs Secretary Anuradha Thakur has confirmed that measures are being developed to protect industries and workers, particularly in sectors heavily reliant on the U.S. market. The government is assessing the potential fallout and is already implementing strategies to bolster domestic demand and support affected manufacturing units.
Government’s Response to Tariff Increases
In light of the U.S. imposing steep tariffs, the Indian government is crafting a comprehensive plan to shield exporters from adverse effects. Thakur emphasized the importance of addressing the needs of employment-heavy sectors that are vulnerable to these changes. Immediate actions under consideration include easing liquidity constraints for businesses, providing special economic zones (SEZ) with greater operational flexibility, and promoting import substitution to prevent insolvencies and job losses. This multi-tiered approach aims to create a buffer against the economic shock caused by the tariffs, ensuring that Indian exporters can continue to thrive in a challenging global market.
Broader Economic Reforms and Fiscal Management
Thakur also highlighted ongoing reforms aimed at enhancing the overall economic landscape. The recent Union Budget has exempted income up to Rs 12 lakh from taxation, which is expected to stimulate consumer spending. Additionally, upcoming Goods and Services Tax (GST) rationalization is anticipated to lower commodity prices, further supporting domestic demand. Despite recent fiscal slippages, Thakur expressed confidence in achieving the government’s fiscal deficit target of 4.4 percent of GDP by the fiscal year 2025-26. She noted that assessments of fiscal performance should consider temporal mismatches in revenue and expenditure, which can distort short-term evaluations.
Economic Growth and Resilience
India’s economy has shown remarkable resilience, with a growth rate of 7.8 percent in the April-June quarter, surpassing China’s 5.2 percent during the same period. Thakur attributed this robust growth to strong private consumption and significant public and private capital expenditure. She pointed out that government spending has played a crucial role in sustaining economic momentum, contributing positively to both growth and fiscal deficit figures. The growth indicators reflect a broad-based expansion across various sectors, including manufacturing, construction, and services, alongside a strong agricultural performance.
Future Outlook and Strategic Planning
Looking ahead, Thakur remains optimistic about the Indian economy’s trajectory. She believes that the factors contributing to the strong performance in the first quarter will continue to support growth. The government is committed to fostering an environment conducive to manufacturing and service sector growth, as well as enhancing agricultural productivity. As the commerce ministry develops its strategic plan to counteract the effects of U.S. tariffs, the focus will remain on ensuring that Indian exporters are well-equipped to navigate the evolving global trade landscape.
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