Indian exporters have asked the government for an interest subsidy scheme, with the higher tariffs on US exports expected to come into effect from April 9 onwards.

The Federation of Indian Export Organisations (FIEO) on Tuesday said a 5 per cent interest subvention is needed to counter the cash flow crunch that exporters are expecting, as the US is charging a 26 per cent tariff on India.

US importers are seeking to negotiate fresh trade deals with Indian exporters following the tariff announcement. Union commerce minister Piyush Goyal is expected to take stock of the issues on Wednesday, along with senior officials of the commerce ministry.

FIEO president S.C. Ralhan told PTI that the higher 26 per cent tariffs are going to impact the payment cycles for Indian exporters. He said that buyers in the US are demanding a 12-14 per cent discount to confirm the orders and to minimise the impact of high import duties.

“They are not ready to absorb all the duty. We have to share the burden with them. They are telling us to hold the consignments. Indian exporters can give 3-4 per cent discounts, but not more than that,” he said.

In India, exporters face an interest rate in the range of around 8-12 per cent, depending on the spread and risk assessment of the banks, after factoring in a repo rate of 6.25 per cent. This is significantly higher than central bank rates of 3.1 per cent in China, 3 per cent in Malaysia, 2 per cent in Thailand, and 4.5 per cent in Vietnam. Moreover, the Indian banks have also become cautious in lending to industries whose cash flows could be affected by geopolitical turmoil.

The government ran an interest equalisation scheme till December 2024. In the Union budget in February, finance minister Nirmala Sitharaman had announced that an Export Promotion Mission with sectoral and ministerial targets will be set up, driven jointly by the commerce, MSME and finance ministries to facilitate easy access to export credit and support to MSMEs to tackle non-tariff measures in overseas markets.

On the possibility of dumping China, Thailand and Vietnam, as they are facing more tariffs than India, Ralhan said traders are concerned.

Trade talks

India and the European Union are exploring the option of negotiating their free trade agreement (FTA) in phases.

Negotiating in two phases allows both sides to first conclude areas where agreement can be reached more easily. Complex issues can be dealt with at a later stage, PTI reported, quoting a government official.

India has also requested Israel to provide market access for 10 agricultural commodities during a meeting between agriculture minister Shivraj Singh Chouhan and his Israeli counterpart Avi Dichter on Tuesday in New Delhi.