Exporters Urge Govt to Restore Tax Incentives

India’s export sector is staring down a significant challenge following the United States’ imposition of a 26% tariff on all Indian exports.

This decision, part of a broader trade adjustment plan with the US, has left exporters scrambling for ways to cushion the financial blow. With key sectors such as marine products, dairy, medical equipment, machinery, and carpets set to be the hardest hit, industry leaders are urging the Indian government to intervene swiftly and restore crucial support schemes that were previously scrapped. These sectors are not just key to India’s economy but are also labour-intensive, and the ripple effects of these tariffs are likely to be felt across the workforce. In response to the crisis, exporters have called for the reinstatement of programmes such as the Interest Equalisation Scheme and the Remission of Duties and Taxes on Exported Products (RODTEP) for Special Economic Zones (SEZs) and export-oriented units. These schemes, which have been discontinued over recent months, provided vital relief to exporters by offering subsidies and tax remission. The removal of these programmes has only exacerbated the financial pressures on export businesses already struggling with the heavy tariff burden.

Sources within the government have acknowledged the importance of supporting these sectors, especially as they face a double whammy of US tariffs and the loss of key financial incentives. However, there remains uncertainty about how the US government might respond to any request for tariff reduction. Exporters, having already begun to assess the damage, are cautiously optimistic that India’s negotiations for a bilateral trade deal with the US could help to mitigate some of these concerns. But any relief from the Trump administration remains far from certain, given the complicated nature of international trade negotiations and ongoing tensions between the two nations. In the wake of the tariff hike, government departments have begun assessing the full impact on India’s exports. Although there has been some measured response from exporters, many have raised concerns about the absence of clear guidance on how tariffs might be lowered, even if the Indian government were to offer permanent concessions. Several businesses have proposed the deferment of reciprocal tariffs with the US, suggesting that this could buy more time as the countries continue their trade talks. Yet, government officials appear pessimistic about the likelihood of US President Trump accepting such demands, especially given the current political climate surrounding trade policy.

Despite these challenges, some relief may come in the form of interest subsidies, particularly for labour-intensive sectors like textiles, leather, and handicrafts. These sectors have long been vital to India’s export economy, and government sources indicate that support measures for them could be expedited. The Finance Ministry’s reluctance to reinstate the Interest Equalisation Scheme, however, remains a point of contention, with exporters stressing the need for these subsidies to be reintroduced to prevent further economic decline. Further complicating the situation is the uncertainty surrounding the future of RODTEP. This scheme, which provides tax remissions to exporters, was halted in February for a portion of the industry and is set to expire in September. Exporters have lobbied for its extension, arguing that its continuation would offer much-needed stability to the industry at a time of heightened unpredictability.

In the meantime, some exporters have suggested diversifying markets away from the US, as countries like Turkey stand to benefit from the global trend of reducing dependence on American markets. Such diversification efforts, however, would require significant government support, both in terms of financial aid and strategic market development.
As India grapples with these pressing trade challenges, it remains to be seen whether the government will implement the necessary measures to safeguard its export industry and secure the livelihoods of millions of workers. While the immediate outlook is challenging, there are hopes that India’s diplomatic and economic efforts will eventually help mitigate the impact of these tariffs and restore confidence in the country’s export sector.

Exporters Urge Govt to Restore Tax Incentives