On August 27, the beginning of the Ganesh festival, U.S. tariffs at 50% will kick in for India. If U.S. tariffs stay at 50%, then there is not much India can do. It must accept that a big portion of its exports to the U.S. will drop to zero – $48 billion[1] in merchandise exports, of the total of $133 billion of India-U.S. bilateral trade. Nearly 1% of India’s GDP will be wiped out. There will be mass unemployment in Tiruppur, Ludhiana, Panipat, Ranipet, Agra, Kanpur and Surat, where textiles, leather and jewellery is made and sent for export to the U.S. The prices of basmati rice and shrimp will shrink. There will also be bankruptcies and banks being saddled with non-performing assets and write-offs. The U.S. has not hit out at the services trade, of which the IT sector forms a significant part. The Indian government must be prepared; the affected businesses already are.
However, if by some stroke of luck, the U.S. tariffs drop to 25% levels, India can, should, and must act. A simple solution is available: grant a five% subsidy to all Indian exporters to the U.S. who are subject to this rate. It needn’t be called a “subsidy”; it can be termed as something else. The country’s civil servants are good at coining names. This should not be a problem.
The 5% subsidy/grant/adjustment allowance should be distributed simply and efficiently if it has to have any impact. If it involves 42 forms, seven departmental approvals, 11 no-objection certificates and delayed payment after 17 months, it will be of no help to businesspersons or workers.
This is a chance to simplify processes. As soon as export proceeds are received by the exporter’s bank, a digital message should go to the reimbursing authority, which should then credit the exporter’s bank with the amount. There should be no need for prior approvals, multiple signatures or any delays. Since the credit will be processed after the export proceeds have been received, fears of bogus exports will stand reduced. Does this mean that there will be no gaming of the system? Of course, not. But since the process is digital, such mischief can be caught early. And even if there are some minor leakages, the benefit of this program will be so overwhelming that the trade-off is worth it.
The disbursing authority should not be a government department, but an institution like the EXIM Bank which is likely to perform smoothly and efficiently in the digital world. The Government of India should fund EXIM with 5% of estimated exports for the subsequent year on a quarterly basis so that EXIM is never short of funds to make the disbursement.
Rather than have endless discussions and committees, this one move will ensure that Indian exporters stay in business and that millions retain their jobs. Chambers of Commerce and civil society organisations should push hard for simple but workable solutions along these lines. It is important not only that businesses survive and people stay employed, but that India retains market shares, which once lost, are difficult to recapture.
Perhaps the 10-day worship of Ganesha will help overcome these tariff obstacles to India’s prosperity, both bureaucratic and international.
Jaithirth Rao is the author of The Indian Conservative and Economist Gandhi. He is the former founder and CEO of MphasiS, and former head of Citibank’s Global Technology Division.
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References:
[1] The Economic Times. “About $48 Billion Worth of Goods to Be Impacted by US’ 50% Tariff: Govt.” The Economic Times, August 19, 2025. https://economictimes.indiatimes.com/news/economy/foreign-trade/about-48-billion-worth-of-goods-to-be-impacted-by-us-50-tariff-govt/articleshow/123386709.cms?from=mdr