The Prime Minister’s Office on Monday met exporters from the sectors hit by the additional 50% duties imposed by the US to discuss measures for enhancing their competitiveness, sources said. Representatives of sectors namely apparel and garments, leather, engineering, marine products, handicrafts, and gems and jewellery attended the meeting. The meeting was against the backdrop of decline in exports to the US from these sectors in September.
What exactly transpired in the meeting, which was held late in the day, could not be immediately ascertained. The government has indicated that exporters will be given some succour in the wake of the hefty US tariffs, but it wanted to gauge the export trends before determining the exact details of the package.
At the same time, government sources have indicated that a trade deal may be around the corner with the Donald Trump administration, which could bring down the “reciprocal” tariff levels to 15-20%. Experts have been emphasising the need for a quick set of measures to salvage the grim situation, as export markets and supply chain connectivity once lost are difficult to regain immediately.
These labour intensive sectors also face the maximum differential in duties against their competitiveness in the US market, the biggest export destination for India. The sectors are represented by their export promotion councils. Tiruppur Exporters Association (TEA) – an association from India’s most important knitwear export hub – was also represented at the meeting.September was the first full month when the 50% extra tariffs by the US were in force.
This led to a 12% decline in merchandise exports to the US to $ 5.5 billion. According to commerce ministry data exports of gems and jewellery to the US have taken a maximum hit, contracting over 70% on year in September. Exports of cotton fabrics and garments declined 36%, marine products 26% and readymade garments 25%. To deal with the situation the government has held numerous meetings with the exporters.
The work on the Export Promotion Mission (EPM) – announced in the budget this year – is nearing completion. It is expected to be approved by the cabinet in coming weeks. Apart from the mission that will take care of export promotion and some of the financing needs of exporters, Another proposal that is being considered is the return of interest subvention scheme for small and medium exporters.
Centre may also launch a credit guarantee scheme for small and medium exporters for loans up to Rs 100 crore. This new scheme exporters could be on the lines of the common Mutual Credit Guarantee Scheme (MCGS) for MSMEs launched earlier this year for the manufacturing sector.
While the efforts are on to look for support measures for exporters, India and the US are locked in intense negotiations on a trade deal. The talks on the agreement have advanced to the final stages and legal text of the agreement is being prepared.
In the agreement India is seeking removal of extra tariffs – 25% reciprocal and 25% for buying Russian oil – to be removed. When the deal comes through, it will put Indian exporters at par with the competitors that face duties in the vicinity of 20%.