US Tariffs May Pressure Indian MSMEs in Key Sectors: Bank of Baroda Report

New Delhi, Apr 5 (KNN) India’s micro, small and medium enterprises (MSMEs), particularly in the sectors of electronics, precious stones, machinery, and readymade garments, could face growing challenges following the United States’ move to impose reciprocal tariffs on imports.

An analytical report by Bank of Baroda highlights the potential impact on these MSME-heavy sectors and suggests the need for government intervention to cushion the blow.

“The sectors which are likely to be impacted most are electronics, precious stones and machinery, besides readymade garments,” said Aditi Gupta, economist at Bank of Baroda.

“Further, since these sectors have a high concentration of MSMEs, the sector may face increased challenges, requiring possible government support.”

While the new US tariff regime primarily targets over USD 18 billion worth of Chinese imports—including electric vehicles, solar cells, semiconductors, and batteries—India may still feel indirect effects. Though not a direct target, India could experience reduced competitiveness in global markets.

The report also raises concerns about credit risk. Companies in the impacted sectors may see shrinking profit margins due to falling export volumes or price cuts needed to stay competitive.

“Profitability of companies in these sectors would need to be monitored. This is something which banks would also need to monitor given their exposures to these sectors,” Gupta added.

However, the overall impact on India might be limited, as the country is not a top-ten source of US imports in the affected categories. “Since higher tariffs have been imposed on all countries, the disadvantage for India could be muted to an extent,” the report concludes.

As the situation develops, policymakers may need to evaluate support measures for vulnerable MSMEs to help them navigate this new trade landscape.

(KNN Bureau)