India’s Export Dilemma: Govt Plans Rescue Mission as US Slaps 50% Tariff

Date: September 14, 2025

India’s exporters are facing one of their toughest challenges in years. From August 27, 2025, the United States has begun charging a 50 percent tariff on many Indian goods. The duty is double the earlier level and comes mainly because India continued to buy oil from Russia. This sudden rise is creating fear in export hubs like Surat, Tirupur, Ludhiana, and Moradabad. Companies worry that if they cannot keep prices competitive, they will lose US buyers for good.

The government is aware of this threat. According to reports, several ministries are now working on ideas to support exporters so they can survive the storm. On the table are relief packages, credit guarantees, lower interest loans, and even new market outreach plans. The goal is simple: help exporters hold on to market share despite the tariff shock.

Why are tariffs such a big deal?

The United States is one of India’s top trade partners. In the last financial year, India exported goods worth $78 billion to the US. That included textiles, jewellery, leather products, engineering goods, seafood, and machinery. These exports support millions of jobs, directly and indirectly.

When tariffs rise sharply, the landed price of Indian products in the US market jumps. For example, if an Indian textile exporter sells a shirt for $10, with a 50% duty, the US buyer has to pay $15. But if the same shirt comes from Vietnam or Bangladesh with lower duties, the buyer will naturally shift. This is why exporters are calling it a battle for survival.

Industry leaders point out that most MSMEs (micro, small, medium enterprises) work on very small profit margins, often between 3% and 5%. A 50% tariff wipes out those profits instantly. Without government support, many exporters may shut down, leading to large job losses.

Which sectors are most affected?

The 50% tariff does not hit all products equally. But some industries are at much higher risk:

• Textiles and apparel: India’s biggest export to the US. Major centres like Tirupur, Ludhiana, and Surat fear losing buyers to Bangladesh and Vietnam.
• Gems and jewellery: Diamonds and jewellery exports are already under pressure. The higher duty will make Indian pieces costlier than Chinese or Thai competitors.
• Leather and footwear: Kanpur and Agra-based units depend heavily on US orders. With a 50% duty, they may lose long-term buyers.
• Seafood and marine products: Shrimp exporters from Andhra Pradesh and Gujarat could see a drop in orders, as countries like Ecuador and Vietnam gain advantage.
• Engineering goods: Small machinery, metal products, and auto components are also part of the hit list.

Together, the affected exports are estimated to be worth $47–48 billion every year.

What is the government planning?

The government is under pressure from both industry bodies and state governments. Relief measures are being discussed at high levels. Here are the main ideas on the table:

1. Relief package with cheaper finance

Exporters are asking for cheaper credit. The government may create special loan schemes at subsidised interest rates. Banks could be told to lend more freely, and collateral rules may be relaxed. Cheaper working capital can help exporters manage their cost burden in the short term.

2. Credit guarantees

The government is exploring a scheme where it guarantees loans that are overdue by up to 90 days. This will give banks confidence to keep lending, even if exporters are struggling to repay on time.

3. Interest Equalisation Scheme (IES)

Industry bodies want the return of the IES, which was stopped recently. Under this scheme, exporters—especially MSMEs—get a part of their interest costs subsidised by the government. The old scheme cost around ₹2,500 crore annually. Bringing it back could soften the tariff blow.

4. Diversifying export markets

The government is also planning trade outreach in around 40–50 countries. The idea is to reduce dependence on the US and build stronger ties with Europe, Africa, Latin America, and Asia. This will not solve the immediate problem but can give exporters more options in the long run.

5. Domestic procurement opportunities

Exporters are asking to sell more to large Indian buyers when US orders decline. For example, Indian Railways, Reliance Retail, or defence procurement could absorb products like textiles, leather goods, or engineering items. If the government encourages such purchases, it could soften the export slowdown.

6. Protecting jobs

The government also wants to prevent mass layoffs. Industries like textiles and shrimp farming employ millions of workers, many in rural and semi-urban areas. If factories close, the impact will be felt socially and politically.

What challenges remain?

Even with relief, several challenges make the situation tricky:

• Competitiveness: A 50% tariff is simply too high. Indian products will remain costlier than those from other Asian nations.
• Permanent loss of buyers: US importers may switch to suppliers in Vietnam, Mexico, or Bangladesh. Once supply chains shift, they rarely return.
• Time delay: Setting up new markets takes time. Exporters may not survive long enough to benefit from diversification.
• Pressure on banks: If exporters default on loans, banks could face higher risks, making them hesitant to lend further.
• Global slowdown: Many markets outside the US are also facing slower demand. This limits India’s ability to shift exports easily.

Why market share matters more than short-term loss

Experts stress that losing market share is more dangerous than just losing money in one season. Once Indian exporters lose US buyers, competitors will lock in those orders. It can take years, even decades, to win them back.

This is why government support is critical. Exporters do not just need help to cover losses. They need help to stay in the game until conditions improve.

Voices from the ground

Exporters have already started voicing their pain.

• A textile exporter from Tirupur said: “Our US clients are already asking for discounts. With 50% duty, they say they cannot afford Indian garments. If this continues, they will move to Bangladesh.”
• A shrimp farmer in Andhra Pradesh noted: “Feed costs are high. Now with extra tariffs, our exports to the US are not competitive. We need urgent support, or farms will close.”
• Engineering exporters told trade bodies that without cheaper finance, they cannot match Chinese suppliers in the US market.

Industry associations like FIEO (Federation of Indian Export Organisations) and EEPC (Engineering Export Promotion Council) are pushing for faster announcements. They say that every week of delay increases the chance of permanent damage.

What the government has promised so far

Finance Minister Nirmala Sitharaman has assured exporters that they will not be left alone. She said that a support package is being designed and will be announced soon. Commerce Ministry officials are in constant talks with industry leaders.

While the exact relief plan is not yet public, the government is signalling urgency. Many expect announcements before the end of September.

Conclusion

India’s export story is at a turning point. The 50% US tariff is a heavy blow, and the danger of losing long-term market share is real. Exporters are worried, workers are anxious, and competitors are waiting to grab India’s place.

But the government is working on a rescue mission. If implemented quickly and effectively, support measures like cheaper finance, credit guarantees, and new market access could prevent the worst outcomes.

Still, exporters themselves must adapt. They may need to improve efficiency, explore new buyers, and upgrade quality standards. In global trade, survival often depends on flexibility.

For now, the battle is clear: protect market share, protect jobs, and protect India’s position in global exports.