Targeted Fiscal Support Key For Indian SMEs Amid US Tariffs, Says Asia Group’s Ashok Malik

India needs to focus on targeted fiscal support to keep small and medium-sized businesses afloat amid the impact of Donald Trump’s 50% tariffs, Ashok Malik, partner at The Asia Group, said on Wednesday.

Speaking to NDTV Profit, Malik acknowledged the strain in the relationship caused by recent tariff hikes, while emphasising that the US remains an unmatched consumption hub for India. Though this demand cannot be easily replaced, he suggested that India may begin adopting a diversification policy. 

“For India we've had a trade deal with the UK….more importantly, we should look to close at least an early harvest deal with the EU….and we also need to find a way of engaging with countries to our East….with the ASEAN countries…that should certainly be on the agenda after we conclude the EU deal,” he said.

Malik highlighted that the additional 25% tariffs that came into effect on Aug. 27, taking the total duty on Indian imports to 50%, could be lifted sooner or later under President Trump, but the bilateral trade deal challenge remains. According to him, there are two key dimensions to the recent US tariff hike on Indian exports. Firstly, India is not heavily dependent on merchandise exports and secondly, some sectors will face challenges.

“Therefore, a fiscal package for sectors involved….to keep companies afloat, small and medium companies in gems and jewellery, leather, and textiles, etc…..is very important as India tries to navigate new markets. In some cases, new markets are going to be possible. In the medium run, in some cases, they might not be possible. But the point is those companies have to be kept solid,” Malik explained.

He also questioned the stated rationale behind the tariffs, which have been “ostensibly” linked to India’s purchase of Russian oil.

“Secondly…look, obviously, the 25% tariffs……there is the ostensible reason that this is going to stop the Russia-Ukraine war, which is very unlikely. To my mind, it's also a pressure point to coerce India to give more concessions as part of the trade negotiations,” he added.

Despite India offering a robust trade deal with broader market access, it’s being held up for geopolitical reasons, not merit, he observed.

“The deal that the US has been offered is impressive and I don't believe it is being rejected on merits. If Trump believes that by coercing India in this manner, they will be able to persuade the government here to make more concessions, I'm afraid that might not be possible,” he noted.

This geopolitical standoff, he suggested, now demands a first move from Washington for any potential de-escalation.

“This geopolitical standoff has made it more difficult for any government in New Delhi to offer more concessions now because you have to stay down, which is going to be very difficult to walk back from for both countries. And the first step has to come from the United States. So, I do believe we are in for a challenging next few months,” Malik said.