US Tariff Hike Set To Hit Indian MSMEs, Especially In Gems, Textiles & Chemicals: Crisil Report

New Delhi, Aug 20 (KNN) The recent decision by the United States to raise tariffs on Indian goods is expected to significantly affect India’s micro, small and medium enterprises (MSMEs), which contribute nearly 45 percent of the country’s total exports, according to a report by Crisil Intelligence.

The US currently levies an ad valorem duty of 25 percent on Indian exports but has announced an additional 25 percent tariff, effective August 27. 

With the combined tariff now rising to 50 percent, the report said the impact will be substantial across key sectors.

Textiles, gems and jewellery — which together account for about a quarter of India’s exports to the US — are expected to be most affected. 

MSMEs dominate these industries, with a share of over 70 percent, leaving them particularly vulnerable to the higher duties.

The gems and jewellery industry, concentrated in Surat, Gujarat, is likely to feel the sharpest effect. Diamonds, which make up more than half of India’s gems and jewellery exports, rely heavily on the US market. 

In chemicals, where MSMEs hold a 40 percent share, Indian exporters may face intensified competition from Japan and South Korea, both of which enjoy lower tariff regimes.

By contrast, the steel sector is expected to experience limited disruption. Most Indian MSME units in the industry are engaged in re-rolling and production of long products, while US imports are largely confined to flat steel products.

In the textiles segment, ready-made garments could lose competitiveness against rivals from Bangladesh and Vietnam, whose exports to the US attract lower tariff rates.

Crisil’s report concluded that the cumulative effect of the tariff hike is likely to constrain export growth and add pressure on MSME-heavy sectors, particularly those with strong exposure to the US market.

(KNN Bureau)