The Government has come up with an “action plan” to respond to the tariff escalation by the U.S., which includes short-, medium-, and long-term measures aimed at not only addressing the short-term pain points, but also increasing long-term competitiveness, the spokesperson of the Ministry of Commerce and Industry told The Hindu. 

According to sources, the short-term measures include providing immediate liquidity and compliance relief to exporters and helping them maintain order levels and employment in vulnerable sectors. 

“The Government of India is proactively responding with a timely, well-calibrated, and comprehensive multi-tiered strategy designed not only to safeguard Indian exporters but also to strengthen our long-term competitiveness in global markets,” the spokesperson said.

“The Department of Commerce has framed a short-medium, and long-term action plan to respond to this tariff escalation,” they added.

“Action plan” to respond to U.S. tariff

According to sources in the Ministry, this action plan is based on a few “guiding principles”: providing immediate relief to exporters with regard to liquidity, compliances, and order levels, building resilience in supply chains, leveraging existing trade agreements, and providing other non-financial assistance to exporters. 

“It is anticipated that exporters may face delayed payments, stretched receivable cycles, and cancelled orders due to the tariff shock,” the source explained. “To prevent working capital stress and protect employment, the government is considering several steps to ease liquidity, prevent insolvencies, and allow exporters to sustain operations until new markets are tapped.”

Major concern for exporters

The Hindu has learnt from various export promotion bodies that the liquidity crunch is a major concern for exporters as they have already bought the stock that they would have exported to the U.S. under normal circumstances. 

“A critical risk is a drop in order levels, particularly in SEZ-based units which contribute significantly to labour-intensive exports,” the source in the Ministry explained. 

They confirmed The Hindu’s August 13 report about the government tweaking the Export Promotion Mission (EPM), announced in the Union Budget 2025, to better align it with the needs of the currently affected export sectors.

That plan is currently being appraised by the Expenditure Finance Committee (EFC). It will include ‘Niryat Protsahan’ or helping exporters with trade finance access such as interest subvention, e-commerce export cards, and collateral support. 

The second pillar would be ‘Niryat Disha’, which would help exporters with market access through export compliance support, branding and packaging support, logistics and warehousing assistance, trade intelligence, and skilling. 

The government is also considering some SEZ policy flexibility norms to help SEZs to sustain production volumes and scale.

The overall plan also includes increasing the resilience of supply chains to prevent future shocks, either in terms of demand or in supply, through measures such as setting up e-commerce export hubs with simplified return logistics, and easier inter-state movement and GST refunds. 

The medium- and long-term strategy includes leveraging the existing Free Trade Agreements that India has signed, an export diversification push so that large shares of exports don’t go to any single country, establishing strategic autonomy is crucial sectors, and creating digital trade infrastructure in the form of the BharatTradeNet (BTN). 

The BTN is envisaged to establish a unified and paperless digital public infrastructure for trade, which can ensure legal recognition of electronic trade documents and digital identities in line with the norms laid out by the United Nations Commission on International Trade Law.

Aam Aadmi Party (AAP) Rajya Sabha MP Ashok Kumar Mittal on Saturday (August 23, 2025) said that if the 50% tariff hike on Indian goods comes into effect on August 27, all soft drinks and beverage companies of the United States of America will be banned from the campus of Lovely Professional University (LPU) in Punjab’s Jalandhar.

“Why shouldn’t there be a boycott? As a citizen of India, as a businessman from Punjab, as LPU’s Founder-Chancellor and as a Member of Parliament, I think the move is absolutely justified. In fact, my boycott call has resonated with scores of people across the globe,” he said in a statement.  

Earlier, Mr. Mittal wrote an open letter to U.S. President Donald J. Trump on August 7, where he described the tariff hike as ‘unfair’ and disruptive.

He urged Mr. Trump to roll back the decision and return to the principles of dialogue, not diktats. In the letter, he had quipped, “What if 146 crore Indians initiate a strategic restriction of U.S. businesses?”

The Indian government is tweaking its earlier plans for an Export Promotion Mission to make it more targeted towards specific sectors in the wake of the increased tariffs imposed by the U.S. on imports from India, The Hindu has learnt.

This would entail reducing the cost of credit for medium, small and micro enterprise (MSME) borrowers in the worst-hit sectors, expediting clearances, and providing them with some sort of export incentives. It is a joint effort across several Ministries and involves detailed consultations with industry stakeholders.

The sectors which will face the brunt of the U.S. tariffs are apparel and textiles, shrimp exporters, organic chemicals, and machinery and mechanical appliances, according to an analysis by the Global Trade Research Initiative. 

Credit access, faster clearances

“The Export Promotion Mission announced in the latest Budget is being tweaked now to provide more help to particular sectors that are likely to be hit by the [U.S.] tariffs,” a senior government official told The Hindu, speaking on the condition of anonymity since the details of the scheme have not yet been finalised. 

“The broad contours are to provide credit guarantees to MSME exporters, speed up their clearances, and there is some discussion on how to provide export incentives,” the official added. 

In the Union Budget for 2025-26, Finance Minister Nirmala Sitharaman had announced an Export Promotion Mission with a ₹2,250 crore allocation for the current financial year, which would “facilitate easy access to export credit, cross-border factoring support, and support to MSMEs to tackle non-tariff measures in overseas markets”. 

Wide consultations

The government official confirmed that the tweaked Mission would include these targets as well, adding that the Mission was initially meant to be a coordinated effort between the Ministries of Commerce, Finance, and MSME, but would now also include coordination with the Ministry of Textiles and Department of Fisheries.

Industry players have also confirmed that the Ministry of Commerce and Industry has been in regular touch with them to receive their feedback and inputs. Trade analysts, too, confirmed this.

“Internally, authorities are consulting extensively with exporters and sector representatives to fine-tune immediate relief measures and shape a long-term, resilient trade strategy capable of withstanding global shocks,” said Krishan Arora, Partner at Grant Thornton Bharat.

Focus on MSME exports

Separately, a Finance Ministry official also confirmed that the Ministry was coordinating with others to come up with a scheme that could address some of the issues being faced by these exporters. 

The government had, as far back as January, announced a credit guarantee scheme for the MSME sector, which would cover loans up to ₹100 crore. The Finance Ministry official said that this scheme was being revamped to “focus on the export aspects of these MSMEs’ activities”. 

Textile, IT, auto and pharma stocks were trading lower on Thursday (July 31, 2025) after U.S. President Donald Trump announced the imposition of a 25% tariff on all goods coming from India starting August 1, plus an unspecified penalty for buying Russian crude oil and military equipment.

Among textile-related stocks, Welspun Living tanked 5.27%, Vardhman Textiles declined 3.27%, Arvind Ltd fell by 3.16% and Alok Industries dropped 2.82% on the BSE.

From the IT pack, shares of Hexaware Technologies quoted 1.92% down, Wipro traded 1.44% lower, Infosys dropped 1.34%, Tata Consultancy Services dipped 1.19%, HCL Technologies (1.06%) and Tech Mahindra (0.88%).

Tracking weak trend in these stocks, the BSE IT index declined 1.29% to 34,577.71.

Among pharma stocks, Jubilant Pharmova dropped 3.15%, Ipca Lab slipped 3.28%, Lupin (2.63%), RPG Life Sciences (2.56%), Dr Reddys Lab (1.55%), Cipla (1.43%) and Sun Pharma (0.81%).

Shares of Maruti Suzuki India, Bajaj Auto, Ashok Leyland, Tata Motors, Mahindra & Mahindra and TVS Motor Company were also quoting lower.

The BSE auto index dipped 0.72% to 52,708.33.

In the equity market, the 30-share BSE Sensex traded 574.64 points down at 80,906.60, and the 50-share NSE Nifty tumbled 173.50 points to 24,678.85.

The announcement is being seen as a pressure tactic to get New Delhi to agree to demands made by the U.S., which has, in recent days, got favourable trade deals with major partners like Japan, the U.K. and the European Union.

The penalty was announced as India has made large purchases of oil and military equipment from Russia. India is the first country to face a penalty for Russian imports.

Utsav Verma, Head of Research, Institutional Equities at Choice Broking, said investors will reassess their strategies with a mix of caution and optimism.

Sectors like textiles, pharmaceuticals, and automotive components are likely to be the most impacted and may see reduced investor interest in the short-term.

However, recent progress in trade negotiations suggests a constructive path forward, and “we believe that the trade deal will eventually follow, provided both nations show the necessary political will”, he said, adding that many investors expect the tariff rate to eventually settle around 15%.

“While a 25% tariff imposed by the US on Indian exports certainly disrupts vital sectors and presents immediate challenges for India’s economy, it is improbable that it will significantly alter the country’s long-term growth path.

“India’s growth narrative is supported by solid fundamentals such as a growing domestic market, vibrant entrepreneurial spirit, and increasing international partnerships,” Rajesh Palviya, SVP – Research, Axis Securities, said.