India’s commerce ministry is closely examining the need for fresh export incentives in response to a steep 26 percent tariff levied by former US President Donald Trump on Indian goods. This tariff, part of Trump’s reciprocal duties policy, is expected to pose a significant challenge for Indian exporters, especially in light of a volatile global trade environment.

Government Evaluating Feedback from Exporters

A high-level meeting between the commerce ministry and Indian exporters is scheduled for this week. The objective is to gather direct industry feedback and understand whether existing support schemes, including RoDTEP (Remission of Duties and Taxes on Export Products), are adequate or if additional fiscal incentives are necessary.

According to a senior official from the department of commerce, “Depending on exporter feedback, we will decide if existing schemes suffice or if fresh measures need to be introduced. If so, we will seek the finance ministry’s approval for budgetary support.”

This proactive approach comes amid growing concern within the export community, particularly from MSMEs (Micro, Small, and Medium Enterprises), who may be disproportionately affected by new trade barriers.

Trump’s Tariff and Global Trade Impact

The 26 percent tariff on Indian exports is part of Trump’s broader agenda to correct trade imbalances through reciprocal duties, targeting countries that maintain higher import tariffs on American goods.

This policy has already sent shockwaves across global markets, prompting a warning from WTO Director-General Ngozi Okonjo-Iweala, who stated that global merchandise trade could contract by nearly 1 percent in 2025 if such policies continue.

Export Fall Could Hurt GDP

A recent analysis by Emkay Global Financial Services estimates that Indian exports to the US could decline by $30-33 billion without countermeasures, translating to a loss of around 0.8–0.9 percent of India’s GDP. This could also impact job creation, foreign exchange reserves, and overall economic momentum in a crucial election year.

Existing Support Through RoDTEP and Export Promotion Mission

The government has already initiated multiple support mechanisms to boost exports. One of the flagship schemes, RoDTEP, provides tax and duty remissions on exported goods, helping exporters remain competitive.

Additionally, the Export Promotion Mission, introduced in the 2025-26 Union Budget, has a budgetary allocation of Rs 2,250 crore and aims to bolster the export capacity of MSMEs.

However, a commerce ministry official noted, “It’s not just the Export Promotion Mission. There are other schemes worth Rs 40,000 to 60,000 crore in play that are already helping exporters.” This includes various sectoral incentives and infrastructure development programs geared towards logistics and warehousing.

Possible Fiscal Push from Finance Ministry

If current mechanisms are found insufficient, the commerce department may approach the Ministry of Finance for additional funding. The intent is to safeguard exporters, especially those in labour-intensive and technology-sensitive sectors, which are most likely to face the brunt of US trade restrictions.

Trade Data Shows Mixed Performance

Despite mounting pressures, India’s merchandise exports during April to February of the previous financial year stood at $395.63 billion, showing resilience when compared to $395.38 billion in the same period last year.

On the flip side, goods imports surged to $656.68 billion, up from $621.19 billion, widening the trade deficit further. The commerce ministry will release the trade data for March on April 15, which will give a clearer picture of the tariff impact and overall export health.

WTO’s Red Flag on Global Trade

The WTO’s cautionary message underscores the broad risks of trade protectionism, highlighting that unilateral tariffs like those imposed by Trump can lead to retaliatory actions, global supply chain disruption, and deceleration in merchandise trade volumes.

Outlook: Can India Navigate this Trade Storm?

India’s response to the US tariffs will be crucial in defining its trade strategy for 2025 and beyond. The flexibility to recalibrate policy, including the use of targeted incentives, could help absorb the tariff shock while sustaining momentum in export growth.

As Indian exporters prepare for tougher competition and reduced margins, government support through policy innovation and fiscal backing could serve as a much-needed lifeline.

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