Relief on the Horizon: Govt Readies Schemes to Shield Exporters from Tariff Shock

Indian exporters are under pressure after the US imposed steep tariffs—up to 50%—on a wide range of goods from 27 August 2025, citing India’s continued purchase of Russian oil. The move hits key sectors such as textiles, jewellery, leather, chemicals, footwear, and seafood, leading to order cancellations, delayed payments, and margin erosion. In hubs like Tirupur, production has already halted and factories are closing. To contain the fallout, the government is preparing a relief package aimed at stabilising exporters, protecting jobs, and easing near-term stress. For investors, these measures will be closely tracked to gauge their impact on export-driven companies and broader market sentiment.

Relief Efforts by the Government to Lower the Tariff Impact

Here are a few efforts by the Indian government to support exporters against tariff shock:

• Export Promotion Mission

The Government of India has proposed a ₹25,000 crore Export Promotion Mission (EPM) to be implemented over FY2025–31. This mission was announced in the Union Budget 2025–26 and is currently under review by the Expenditure Finance Committee. The EPM is structured around two schemes: Niryat Protsahan and Niryat Disha. Niryat Protsahan will receive ₹10,000 crore, while Niryat Disha is allocated ₹14,500 crore. The mission aims to provide affordable credit, support quality compliance, and enhance market access for exporters, especially MSMEs, which contribute over 45% of India’s total exports.

• Collateral Free Loan

In response to escalating tariff pressures, the Indian government is doubling the collateral-free loan limit under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) from ₹10 lakh to ₹20 lakh for exporters. The enhanced limit will allow export-oriented micro and small enterprises to access term loans up to ₹20 lakh without collateral, with the CGTMSE covering 75–95% of the default risk. The guarantee fee is proposed at 1.5%, and the scheme will run through FY31, aligning with the 16th Finance Commission cycle. This expansion will help incentivise export diversification to markets like Europe, Latin America, and the UK.

In addition, the government plans credit guarantees covering loans with overdue periods up to 90 days, particularly for small exporters.

• Interest Equalisation Support

Under Niryat Protsahan, the government has earmarked ₹5,000 crore for interest equalisation support. This scheme will subsidise interest rates on pre- and post-shipment credit for exporters, particularly Micro, Small, and Medium Enterprises (MSMEs). Earlier, MSMEs received a 3% interest subvention, which is expected to increase under the new framework. This measure is projected to benefit over a million MSME exporters by reducing their effective borrowing cost. The scheme will be administered through Exim Bank and coordinated with ECGC and CGTMSE.

• GST and ITC Reforms

In parallel with direct credit support, the government is implementing indirect tax reliefs to ease cash flow constraints. The government has updated the GST structure with just two tax slabs: 5% and 18% instead of four, streamlining taxation and reducing costs on most goods. High-end items still attract higher rates, while life and health insurance are tax-exempt. The GST 2.0 reforms also include faster Input Tax Credit (ITC) refunds for exporters.

These measures are designed to immediately release working capital trapped in tax processes. For instance, the average ITC refund processing time has been reduced from 45 days to 17 days under the new system. This is expected to benefit millions of registered MSME exporters, enabling them to maintain production cycles and honour overseas contracts despite tariff-induced disruptions.

• Market Diversification Efforts

India is actively working to reduce its over-dependence on the US market. Government bodies have initiated outreach programmes in around 40 countries; exporters are encouraged to expand into markets such as Europe, Latin America, Africa, and Southeast Asia. Sessions with export organisations, such as the Federation of Indian Export Organisations (FIEO), are advancing new trade strategies. The emphasis is on leveraging FTAs, diversifying supply chains, and finding alternative buyers.

• Non-financial Assistance

Beyond financial support, the government intends to provide non-financial assistance. Schemes under development include compliance support, branding and packaging aid, logistics and warehousing assistance, especially tailored for MSMEs. At the state level, for example, in Uttar Pradesh, the newly approved Export Promotion Policy (2025–30) includes export credit insurance, digital marketing grants, trade fair funding, and support for ODOP (One District, One Product) sectors.

Conclusion

The US tariffs of up to 50% on Indian goods will disrupt sectors like textiles, jewellery, chemicals, leather, footwear, and seafood, directly impacting listed companies such as Welspun India, Arvind Ltd, Titan, KPR Mill, Century Plyboards, Bata India, Relaxo Footwears, and Avanti Feeds.

For retail traders and investors, short-term volatility is expected as exporters face cancelled orders and tighter margins. However, the Indian government’s ₹25,000 crore Export Promotion Mission, enhanced collateral-free loans, interest equalisation, and GST reforms aim to cushion exporters and preserve jobs. Faster ITC refunds and credit guarantees will particularly benefit MSMEs, helping sustain supply chains and contracts. Market diversification towards Europe, Latin America, and Africa could also open new opportunities.

Investors should track companies with strong balance sheets, diversified export bases, and strong domestic demand, as these players are more likely to withstand tariff shocks and capitalise on government-backed relief measures.

Also Read:

Shrimp at the Crossroads: How India’s Blue-Gold Can Bounce Back from Tariff Tides
India’s Q1 GDP at 7.8%: What Traders and Investors Need to Know

Sources

Times Now
Newsd
Money Control
Financial Express
The Economic Times
The Times of India
NDTV