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Let us first get the good news. Amidst the disruptive tariff scandals from the US, India’s goods and services exports have been a silver lining. Despite worries about a slowing global economy for the past few years, India shipped tell on goods coving a record $820 billion in the financial year 2024-25. This is approximately a 6 percent increase compared to the previous $778 billion figure for the past fiscal year. They also exported services worth $441 billion which is a new record. This was achieved amid several challenges such as the Red Sea crisis, the Israel–Hamas clash spilling over into the Gulf, continued Russia–Ukraine conflict, and slowdowns in other developed countries. The achievement showcases the remarkable strongness of India’s economy along with inventive exporters. With this, India has now positioned itself as the 12th largest exporter and 15th largest importer in the globe.Now, India is currently India is facing the worst challenge to its international trade post the COVID pandemic. Countries are scrambling to avoid the greatest brunt of America’s retaliatory tariffs. Its President Donald Trump has postponed his tariffs for 90 days to allow surplus trading countries (which India has a $40 billion trade surplus) rebuild trade agreements with the US). Global markets are in turmoil and trillions of dollars are disappearing.
We will have to face the so-called 'stern demands' on deep tech investments, particularly in the manufacturing region and other critical sectors of the economy, which constitute 15-17% of India’s GDP, and 11.4% of employment (1.85 crore employed). It is anticipated that industries will be struck by US duties in chemicals, pharmaceuticals, metals, jewellery, and food products.
The most recent pause of 90 days on the implementation of his tariffs on all countries, excluding China which faces up to 145% tariffs on its goods, should assist in expediting the bilateral trade agreement between India and the US. Undoubtedly, the BTA which is under negotiation will be of immense advantage for the US and India, and will further bolster the manufacturing industry in the country. For Japan and Germany, the figure stands at approximately 20% of GDP, while for China, it exceeds 26%. The relative comparison highlights the potential growth of the sector in India.When many countries are adopting the China +1 strategy to avoid over-reliance on a single country while looking for new territories to exploit, alterations in the trump tariffs saga can indeed contribute towards the growth story of India. That requires the government to change policies and give more attention to the manufacturing sector because of the fierce competition coming from Southeast countries like Vietnam. Incentives can include: stronger fiscal support for every level of business—SMEs and large corporations, increased export promotion MSMEs access to subsidized credit, and lower interest rates. The Modi government needs to address the issue as to why his government did not fulfill its commitment of increasing the sectoral GDP contribution to 25 percent by 2025.
This year in February, the US and India agreed to a new target of $500 billion for bilateral trade by 2030; this is more than doubling the previous goal. Unlike other US trade partners, India does not face disproportionately high tariffs compared to India.
Even the fact that Trump went easy on India shows how alluring the nation with a population of 1.4 billion that is growing its economy at the fastest rate in the world is. India needs to diversify and increase focus on emerging trade partnerships with the European Union, ASEAN, and other developing regions of Africa and Latin America.
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