A Wake-up Call to Recalibrate India's Trade Geography

By fast-tracking reforms, reimagining trade partnerships, and reinforcing self-reliance, India can turn the tariff blow into an inflection point that propels it towards double-digit growth.

- DINESH KANABAR, CEO, Dhruva Advisors LLP

N THE HIGH-STAKES world of global trade, hope is never a strategy. Over the past few months, India has found itself at the receiving end of punitive U.S. tariffs—first a 25% levy, among the steepest in the region, and then another 25% linked to its purchase of Russian oil. For exporters of gems and jewellery, textiles, and other sectors whose most profitable market is the U.S., this is not just a squeeze on margins but a potential existential challenge.

The numbers are sobering. The consensus among economists is that these tariffs could shave off between 0.75% and 1% from India’s GDP growth. For an economy already performing below its potential—growing at 6-7% when most agree it could sustainably clock 9-10%—this shock could not have come at a worse time.

But, within every crisis lies a catalyst. The tariff blow is a reminder that India cannot afford to rely excessively on one market, or one set of relationships or reforms.

An immediate cushion

The Centre's swift move to rationalise GST rates has been the first, and arguably the most significant, response. While long in the making, the timing is fortuitous. The lowering of the indirect tax burden stimulates domestic consumption and simplifies compliance, reducing the friction that has long dogged entrepreneurs.

However, GST alone cannot neutralise the tariff shock. It buys breathing space, but the larger question remains: how can India convert this external adversity into an internal reform momentum?

Structural roadblocks

The real bottleneck lies not in tariffs but in India’s economic plumbing. The following factors need immediate attention:

Ease of doing business: