Trump tariffs impact: Modi govt to roll out relief packages for affected sectors; won’t hurt fiscal roadmap

The government is working on a relief package for the industries affected by the 50% tariff imposed by the Donald Trump administration on India. Government sources have indicated that the package will be designed in a way that affected sectors will get relief from the tariff onslaught, while ensuring that there is no impact on India’s fiscal consolidation roadmap.

“The Ministry of Finance is taking feedback from the stakeholders. A targeted package for the affected segments of the economy will be announced after understanding the needs of the industry. The idea is to handhold the affected segments till the time they are able to find alternative exports destinations,” a top government source told Fortune India. 

Various options, including an emergency credit line, like the one announced at the time of the Covid-19 pandemic, are being considered. The only difference is that it will be provided to the tariff-affected segments of the economy.

Being asked whether the move will affect the government’s fiscal consolidation roadmap, the source said, “The attempt of the government will be to ensure that the needs of the industry are completely fulfilled. We will meet the demands and also ensure there is no compromise on the fiscal consolidation roadmap.” 

Fiscal deficit for the current financial year has been estimated at 4.4% in the budget. The government bettered the FY25 fiscal deficit at 4.8% of GDP, compared with estimates of 4.9%.

Shrimp, textile, gems and jewellery are some of the key exports to the U.S., which will be affected by the U.S.’ penal tariffs on India. “India’s shrimp export volume is set to fall 15-18% this fiscal with the US raising tariff to 58.26% with effect from August 27. Realisations would fall, too, even as exporters look to change their product mix and scout for alternative export destinations,” said Crisil in a report.

“India’s natural diamond polishing industry faces a steep 28-30% fall in revenues to $12.50 billion this fiscal, compared with $16 billion last fiscal, after the imposition of 50% tariffs (25% reciprocal plus 25% penalty) by the U.S.,” Crisil said in another report.

On Thursday, a delegation of the Federation of Indian Export Organisations (FIEO) met Finance Minister Nirmala Sitharaman to apprise her of the challenges faced by Indian exporters due to the recent escalation of tariffs imposed by the United States.

During the meeting, the minister reassured the delegation that the government stands firmly behind Indian exporters in this hour, according to a release from FIEO.  “She emphasised that the government is committed to addressing all concerns of the exporting community and will explore every possible avenue to safeguard their interests,” said the FIEO release.

“FM Sitharaman also underlined the importance of protecting workers’ livelihoods, calling upon industry leaders to reassure employees of job continuity even amidst global headwinds. She affirmed that the government will extend comprehensive support to exporters to sustain growth momentum and uphold India’s resilience in international trade,” said the release.