Tariffs: India could offer its exporters a relief package

Fiscally viable measures of support may help Indian exports sail through the US tariff storm

- MADAN SABNAVIS

US President Donald Trump's tariff offensive can be likened to the covid pandemic for affecting all countries. What sounded bizarre on paper is a reality. Five years after the covid outbreak, the economic disruption caused by one man has been remarkable, marked by whims and contradictions. While there appears to be room for discussion on a trade deal, India should be prepared for the worst: A scenario in which the US threat of a 25%-plus tariff comes to bear. Is there anything the Indian government can do to protect exporters? Yes. A kind of public-private arrangement could be made—with a sunset clause—for the overall cost imposed to be shared by the government and exporters so that higher prices at the other end do not depress US demand. A support framework should be drawn up to help exporters adjust to this new normal over a period of 1-3 years.

Policy decisions would need to be taken on two scores. First, should the package be only for impacted exports to the US or for all merchandise exports? The former could imply discrimination, while supporting the export of goods to all destinations could be justified on the need for a fillip to this broad activity in the face of global headwinds. Second, for how long should such support last? Specifying a time-frame will spell certainty for exporters. Both will, of course, depend on the Centre's fiscal space.

After those calls are taken, a package can be devised. A narrowly aimed one need not involve any special new scheme, as existing policy programmes can be used to help tariff-affected businesses. This way, we will need only minor budget-outlay additions.