Revealed: How Govt is Seeing Tariff Impact Playout, Planning Counter Steps

US tariffs at 50% will impact India's trade and some sectors like gems and jewellery, chemicals, home decor are set to suffer losses, government sources told NDTV Profit. The impact is expected to be for the short term as the "supply chains will recalibrate". Sources said that the new date for negotiations on the tariff rate between the two countries is not fixed yet.

"The next formal round of negotiations is scheduled to happen soon," said sources. The industry anticipates liquidity crunch and order books could slow down with the tariff hike. "The industry is of the opinion that deal should happen in best interest of the country," sources told NDTV Profit.

The government is looking at the restoration of old schemes and the growing e-commerce exports to deal with the current trade situation. Sources added that amid the tariff rate of 50%, there is a "need to create resilient supply chains". However, that will take at least 5-6 months.

The Center is ''seeing the situation as opportunity, wake up call for industry to diversify export basket." The anticipated domestic demand in the near-term could cushion the possible setbacks in the economy from the tariff rate, as per sources. The upcoming GST rate rationalisation will lead to some buoyancy and the focus is on "big ticket reforms".

The tax cuts are seen to raise demand and consumption in urban areas, especially in the festive season. The government is also looking at increasing the exports to other countries, including BRICS. A team from Federation of Indian Export Organisations met finance minister Nirmala Sitharaman on Aug. 28 and apprised her of the adverse impact of higher tariffs on the market access, competitiveness and India's employment rate.

FM Sitharaman reassured FIEO that the government stands firmly behind Indian exporters and will extend a comprehensive support to sustain the economic growth. Sources told NDTV Profit that the liquidity-related demands will be met through the Export Promotion Mission (EPM).

The government is working to expedite the rollout of EPM. In this regard, sources said that the Centre is conducting fast paced consultations for EPM and that the mission is being rolled out as a six-year package.