Hello Mumbai Business Desk
In previous parts of this series, we discussed global trade trends and the challenges faced by the MSME sector, examining how small and medium enterprises are navigating an increasingly complex international trade environment. We also looked at tariff impacts, market access issues, and the strategies MSMEs have adopted to remain competitive.
this final part, we will focus on two critical areas that shape India’s trade future:
1. Prime Minister’s Perspective & Government Actions
2. Geopolitical & Economic Angles
1. Prime Minister’s Perspective & Government Actions
PM Modi’s Vision on Tariff Challenges:
In response to escalating global trade tensions, particularly the U.S. imposing a 50% tariff on Indian exports, Prime Minister Narendra Modi has emphasized India’s commitment to self-reliance and strategic autonomy. He reiterated the “Atmanirbhar Bharat” initiative, aiming to bolster domestic manufacturing and reduce dependency on foreign markets. Modi’s administration views these tariffs not merely as economic obstacles but as opportunities to recalibrate India’s trade strategies and enhance its global competitiveness. The government is actively promoting high-value manufacturing sectors, investing in critical infrastructure, and encouraging innovation and technology adoption to strengthen India’s export capabilities.
To further mitigate the impact of global tariffs, the government is focusing on diversifying trade partnerships beyond traditional markets and providing financial and technological support to MSMEs. These measures aim to safeguard exporters, reduce vulnerabilities to external shocks, and position India as a resilient and influential player in the global market. By strengthening domestic capabilities and strategically engaging in global trade, India seeks not only to protect its economic interests but also to enhance its long-term growth trajectory amid an increasingly protectionist international environment.
Government’s Strategic Measures:
The Indian government has initiated several measures to mitigate the impact of the U.S. tariffs:
Export Promotion Schemes: The government is preparing a support package for exporters, including credit and liquidity measures akin to those during the Covid-19 pandemic, focusing on aiding MSMEs in sectors like textiles, gems, and engineering goods.
Legal Reforms: A proposal to provide exporters with a 90% upfront GST refund is under consideration, pending necessary legal amendments. This aims to ease liquidity constraints and streamline refund processes for exporters.
Trade Diversification: Efforts are underway to reduce dependence on the U.S. market by exploring new trade partnerships, particularly with the European Union, Middle East, Africa, and Southeast Asia.
2. Geopolitical & Economic Angles
Geopolitical Implications:
The U.S. tariffs have strained bilateral relations between India and the United States. India has condemned the tariffs as “unfair, unjustified, and unreasonable,” asserting its autonomy in energy policy and trade decisions. This situation has prompted India to strengthen ties with other global
powers, including Russia and China, and to seek closer trade relations with the European Union.
Economic Impact:
Export Decline: India’s exports to the U.S. are projected to decrease significantly, with estimates suggesting a 43% drop from $86.5 billion in FY2025 to $49.6 billion in FY2026.
GDP Growth: The tariff imposition is expected to shave off approximately 0.2% to 0.4% from India’s projected GDP growth for 2025, potentially lowering it from 6.5% to around 6.1%.
Sectoral Impact: Industries such as textiles, gems and jewellery, and pharmaceuticals are facing significant challenges due to the tariffs. For instance, the leather industry in Tamil Nadu has been severely affected, with many tanneries forced to shut down. T
Strategic Responses:
Supply Chain Diversification: Indian electronics manufacturing service (EMS) firms are actively adapting to potential U.S. tariffs by diversifying and recalibrating their supply chains, emphasizing the importance of adopting blended supply chain models and expanding their geographic footprint.
Data Centre Expansion: India is set to double its third-party data centre capacity from 1,250 megawatts in March 2025 to 2,500 megawatts by March 2028, driven by a significant investment of ₹90,000 crore over the next three years. This expansion highlights India’s increasing focus on digital infrastructure to support rising data consumption.
Conclusion:
The 2025 tariff scenario underscores the importance of strategic policymaking, resilience, and global foresight. Through proactive government action, diversified trade partnerships, and a focus on value-added domestic production, India is positioning itself not just to mitigate immediate challenges, but to emerge stronger in a protectionist global environment. The path forward emphasizes balance—between geopolitical diplomacy, economic growth, and the long-term vision of self-reliance.
Guest Post by:
Amita Goyal Glasba financial Services Director
