India redrawing trade map to bypass US tariffs

Faced with steep tariffs imposed by the US government, the Centre is huddling with export promotion councils and manufacturers to find a way to rework the country's exports strategy, two government officials aware of the development said.

- Dhirendra Kumar

The development comes on the back of a deadlock in bilateral trade agreement (BTA) negotiations between India and the US, which the two countries have been grappling with since June, as reported by Mint on 11 June.

The new plan involves diversifying into markets such as the UK, with which India recently signed a free trade agreement (FTA), and the European Union (EU), where negotiations are in the final stage and a deal could be signed before the end of the year, the officials cited above said on the condition of anonymity.

India's plan would also focus on sector-specific challenges and policy measures to support exports, including exploring new markets with the help of Indian missions overseas, the officials said. The government sees strong export potential in regions like Saudi Arabia, France, Vietnam, the Netherlands, Mexico, and Ethiopia, among other countries.

The review will additionally focus on India's growing competitiveness gap with Bangladesh and with ASEAN countries such as Vietnam and Indonesia, which have received significant tariff relief under the latest US executive order.

While India faces a 25% dutyjust 1 percentage point down from 26% in the 2 April notification Vietnam's tariffs have been reduced from 46% to 20%, Indonesia's from 32% to 19%, and Bangladesh's from 37% to 20%, giving these exporters a clear edge in the US market.