In a bid to soften the impact of steep US tariffs on Indian exports, the Commerce and Industry Ministry is pushing for export diversification and has fast-tracked EU trade negotiations by holding monthly talks with the 27-member bloc, a government official said on Thursday. In the last 12 months, India and the EU had conducted only four rounds of negotiations.
The government’s diversification push comes at a time when trade 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 such as textiles, gems and jewellery, and marine products. The US remains India’s largest export market across most product categories.
“Trade negotiations have gathered pace and are now taking place on a monthly basis. We aim to wrap up talks by the end of the year. While a number of important chapters have been closed, some sensitive areas remain unresolved,” a government official told The Indian Express.
This is significant since the EU is among India’s largest export destinations. Duty elimination under a trade deal for goods such as textiles, footwear, and gems and jewellery could boost India’s labour-intensive sectors and help offset export declines to the US due to high tariffs and expected demand slowdowns.
Diversification into other markets is also being explored as India is just less than two months away from bringing into effect the pact with the European Free Trade Association (EFTA). While the India-EFTA trade deal will come into effect on October 1, the government is pushing for an early implementation of the recently concluded UK deal, an official said, adding that negotiations with Oman have also concluded.
“We have requested the UK to fast-track the implementation of the trade deal. The trade talks with Oman have concluded and will be signed once both countries mutually agree on a date. We have also begun fast-tracking EU trade deal negotiations,” another government official confirmed. However, UK deal implementation could take up to 12 months, as trade agreements there must pass through the British Parliament.
India and the four-nation EFTA — comprising Iceland, Liechtenstein, Norway and Switzerland — signed a trade pact in March 2024. The EFTA nations have committed to investments worth $100 billion in India over 15 years.
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Government officials said that in light of rising trade uncertainty, India is targeting new markets to diversify exports, while also aiming to reduce imports from select nations.
The push for export diversification comes as the US has imposed 25 per cent reciprocal tariffs, with further increases up to 50 per cent announced, citing India’s imports of Russian oil. Exporters warn these steep tariffs could render Indian goods unviable.
According to rating agency Crisil’s estimates, during the last financial year the US accounted for 20 per cent of India’s merchandise exports and 2 per cent of its overall GDP. The existing 25 per cent reciprocal tariff on India already exceeds those faced by many competing Asian countries, except China.
“As a result, sectors such as diamond polishing, shrimp, and home textiles may face declining sales volumes due to high US dependence; rising costs from partially absorbed tariffs may ultimately affect their earnings,” the Crisil report stated.
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For diamond polishers, US exports accounted for 25 per cent of total revenue in the last financial year. The tariffs will further pressure already thin operating margins. “Working capital cycles will lengthen as inventory moves slowly and customers delay payments,” the report added.
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