In a bid to melt the affect of steep US tariffs on Indian exports, the Commerce and Trade Ministry is pushing for export diversification and has fast-tracked EU commerce negotiations by holding month-to-month talks with the 27-member bloc, a authorities official stated on Thursday. Within the final 12 months, India and the EU had carried out solely 4 rounds of negotiations.
The federal government’s diversification push comes at a time when commerce negotiations with the US have paused, following President Donald Trump’s doubling of tariffs on Indian exports to 50 per cent — threatening labour-intensive sectors reminiscent of textiles, gems and jewelry, and marine merchandise. The US stays India’s largest export market throughout most product classes.
“Commerce negotiations have gathered tempo and at the moment are going down on a month-to-month foundation. We purpose to wrap up talks by the top of the 12 months. Whereas a lot of essential chapters have been closed, some delicate areas stay unresolved,” a authorities official advised The Indian Specific.
That is important because the EU is amongst India’s largest export locations. Obligation elimination underneath a commerce deal for items reminiscent of textiles, footwear, and gems and jewelry may enhance India’s labour-intensive sectors and assist offset export declines to the US because of excessive tariffs and anticipated demand slowdowns.
Diversification into different markets can also be being explored as India is simply lower than two months away from bringing into impact the pact with the European Free Commerce Affiliation (EFTA). Whereas the India-EFTA commerce deal will come into impact on October 1, the federal government is pushing for an early implementation of the lately concluded UK deal, an official stated, including that negotiations with Oman have additionally concluded.
“We have now requested the UK to fast-track the implementation of the commerce deal. The commerce talks with Oman have concluded and shall be signed as soon as each international locations mutually agree on a date. We have now additionally begun fast-tracking EU commerce deal negotiations,” one other authorities official confirmed. Nevertheless, UK deal implementation may take as much as 12 months, as commerce agreements there should cross by means of the British Parliament.
India and the four-nation EFTA — comprising Iceland, Liechtenstein, Norway and Switzerland — signed a commerce pact in March 2024. The EFTA nations have dedicated to investments value $100 billion in India over 15 years.
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Authorities officers stated that in mild of rising commerce uncertainty, India is concentrating on new markets to diversify exports, whereas additionally aiming to cut back imports from choose nations.
The push for export diversification comes because the US has imposed 25 per cent reciprocal tariffs, with additional will increase as much as 50 per cent introduced, citing India’s imports of Russian oil. Exporters warn these steep tariffs may render Indian items unviable.
Based on score company Crisil’s estimates, over the past monetary 12 months the US accounted for 20 per cent of India’s merchandise exports and a couple of per cent of its total GDP. The prevailing 25 per cent reciprocal tariff on India already exceeds these confronted by many competing Asian international locations, besides China.
“In consequence, sectors reminiscent of diamond sprucing, shrimp, and residential textiles might face declining gross sales volumes because of excessive US dependence; rising prices from partially absorbed tariffs might in the end have an effect on their earnings,” the Crisil report acknowledged.
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For diamond polishers, US exports accounted for 25 per cent of complete income within the final monetary 12 months. The tariffs will additional stress already skinny working margins. “Working capital cycles will lengthen as stock strikes slowly and clients delay funds,” the report added.
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