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The immediate impact of the recently imposed US tariffs on Indian exports may appear limited, but the secondary and tertiary effects on the economy pose significant challenges that must be addressed, highlighted a report by the Department of Economic Affairs under the Ministry of Finance.
According to the report, the initial impact on exports is contained; the broader effects could emerge in areas such as supply chains, inflationary trends, and the competitiveness of Indian goods in global markets. It stated, "While the immediate impact of recent US tariffs on Indian exports may appear limited, their secondary and tertiary effects on the economy pose challenges". To navigate the challenging global trade environment, the Prime Minister has announced a set of policy initiatives aimed at boosting growth and strengthening the economy. A key step is the creation of a Task Force for Next-Generation Reforms, which will work towards simplifying regulations, lowering compliance costs, and fostering a more enabling environment for start-ups, MSMEs, and entrepreneurs. Additionally, the government is preparing to roll out the Next-Generation GST Reforms in the coming months. These reforms will focus on reducing the tax burden on essential items, a move expected to provide direct relief to households and boost consumption demand. The report also noted that a recent rating upgrade is expected to provide further momentum by lowering borrowing costs, attracting greater foreign capital inflows, expanding access to global capital markets, and easing inflationary pressures. This, in turn, will cut input costs for businesses and support overall economic growth. The report also shared India's active pursuit of a diversified trade strategy to sustain resilient trade performance in the face of rising global uncertainties. Recently, India concluded Free Trade Agreements (FTAs) with the UK and the European Free Trade Association (EFTA). Negotiations are ongoing with major partners, including the US, the European Union, New Zealand, Chile, and Peru. However, the report cautioned that while these initiatives are important, they will take time to yield results and may not fully offset potential shortfalls in exports to the US if the current tariff regime persists. Despite the tariff challenges, the report noted that downside risks to global growth are likely to keep international commodity prices in check. This could help partly offset the impact of higher tariffs. The government, it said, is proactively managing risks and seizing opportunities by strengthening domestic capacity, promoting exports, diversifying supply chains, and securing alternate import sources. (ANI)
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