Answer

Introduction

India’s export sector, employing over 28 crore people and contributing nearly half (45.79% in FY25) of goods exports, faces a critical challenge after the U.S. imposed steep tariffs of 25% on seafood and textiles (with the threat of escalation to 50%). Since the U.S. accounts for nearly one-third of India’s seafood and apparel exports, these sanctions expose structural vulnerabilities in India’s trade dependence and highlight the need for resilient policy and structural reforms.

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Challenges Posed by Tariff Barriers

• High dependence on U.S. market: India’s export basket remains over-reliant on the U.S., making shocks like tariff hikes disproportionately disruptive.
  Eg: Nearly one-third of India’s seafood and apparel exports annually go to the U.S.
• Livelihood insecurity for large workforce: Tariff impositions endanger labor-intensive industries that provide mass employment, worsening unemployment and rural distress.
  Eg: Fisheries employ 28 million, while fisheries and textiles together support 135 million people.
• MSME vulnerability: MSMEs lack financial resilience and global competitiveness to withstand sudden tariff-driven cost escalations.
  Eg: MSMEs contribute 45.79% of exports in FY25, employing 28 crore people, but face rising costs and credit challenges.
• Deadlock in bilateral negotiations: Failure of India-U.S. trade talks deprives exporters of timely diplomatic redressal mechanisms.
• Limited alternative markets in short term: Building new trade networks requires long-term structural efforts, limiting immediate diversification options.
  Eg: Global examples like EU’s reliance on Russian oil show path dependency in supply chains.
• Credit stress for export sectors: Exporting sectors face rising loan defaults as profitability shrinks under tariff pressure, demanding urgent relief.
• Rising regional inequality: Tariff shocks deepen economic asymmetries as export-dependent states face sharper revenue and employment losses.
  Eg: Coastal states dependent on seafood exports face sharper risks than inland states.

Policy Measures for Resilience

• Tweaking Export Promotion Mission (EPM): Expanding Export Promotion Mission (EPM) to cover vulnerable sectors with cheaper export credit and risk insurance ensures resilience against tariff shocks.
  Eg: Union Budget 2025 allocated ₹2,250 crore; talks are on to include Textiles and Fisheries Ministries.
• Credit relief mechanisms: Temporary moratoriums and interest subvention schemes can ease liquidity crunch for exporters during tariff disruptions.
  Eg: Fisheries demand a 240-day moratorium; textiles demand interest subvention.
• Market diversification drive: Exploring alternative destinations reduces the vulnerability of exporters to tariff shocks from a single large market like the U.S.
• Insurance against overseas risks: Comprehensive export insurance mechanisms can cushion exporters against sudden tariff escalations and payment defaults.
  Eg: EPM explicitly designed to insure payments from overseas buyers.
• WTO-based dispute resolution: Invoking multilateral trade frameworks provides a rules-based mechanism to counter unfair tariff impositions.

Structural Reforms for Long-Term Resilience

• Diversification of export basket: A broader mix of high-value and technology-driven exports reduces India’s exposure to sectoral shocks and tariff wars.
  Eg: India’s overdependence on textiles and fisheries creates vulnerabilities, as seen during recent U.S. tariff hikes.
• Strengthening MSME competitiveness: Upgrading MSMEs in technology, quality standards, and branding ensures their survival in global markets facing non-tariff barriers.
  Eg: Many Indian MSMEs struggle to comply with EU sustainability and carbon footprint norms, losing competitiveness.
• Supply chain integration: Deeper embedding of Indian firms into global value chains enhances resilience by making Indian exports harder to replace.
  Eg: China’s dominance in rare earths shows how supply chains cannot be undone overnight, highlighting India’s need for similar integration.
• Infrastructure and logistics upgrades: Modern ports, warehouses, and cold chains lower transaction costs and improve India’s export competitiveness.
  Eg: India’s fisheries exports are constrained by inadequate cold storage and logistics, limiting expansion into Japan and EU.
• Export finance deepening: Affordable and accessible export credit ensures exporters’ liquidity during global downturns and trade disruptions.
  Eg: The Export Promotion Mission (2023) aims to expand cheaper credit access for MSMEs to mitigate volatility.

Conclusion

The U.S. tariff escalation highlights India’s export vulnerabilities from market dependence, MSME fragility, and stalled trade talks. Short-term relief through EPM and credit support must be paired with long-term reforms, diversification, supply chain integration, and regional partnerships to safeguard 135 million livelihoods and bolster economic sovereignty.

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