05-Apr-2025, 01:12 PM SBI report has recommended that India bolster its Production-Linked Incentive (PLI) schemes. This suggestion comes as a strategic response to the United States imposing a 26% tariff on Indian exports, aiming to enhance the competitiveness of Indian industries on the global stage.
SBI report Understanding the U.S. Tariffs
Details of the Tariffs
On April 3, 2025, the U.S. announced a 26% tariff on Indian imports. This decision is part of a broader strategy to address trade imbalances and perceived non-reciprocal practices. Notably, this tariff is lower than those imposed on other Asian nations, such as China’s 54% and Vietnam’s 46%.
Impacted Sectors
While the Indian pharmaceutical industry, with approximately $9 billion in annual exports to the U.S., has been spared, other sectors like electronics and gems and jewellery are expected to face challenges. Collectively, over $23 billion worth of Indian exports could be affected by these tariffs.
SBI Report’s Recommendations
Expansion of PLI Schemes
The SBI report emphasizes the need to broaden the scope of existing PLI schemes to include sectors such as textiles, engineering goods, and gems and jewellery. By encompassing a wider range of products, the report suggests that India can stimulate investments in domestic industries and enhance global competitiveness.
Extension of Scheme Duration
In addition to expanding sectoral coverage, the report advocates for extending the duration of PLI schemes by an additional three years. This extension aims to provide long-term policy certainty, thereby boosting investor confidence and encouraging sustained industrial growth.
Strategic Implications for India
Reducing Dependence on U.S. Markets
The SBI report underscores the importance of diversifying India’s export markets. Strengthening trade partnerships with regions like the European Union and ASEAN could mitigate the risks associated with over-reliance on U.S. markets. Such diversification would help insulate the Indian economy from external shocks and trade policy shifts.
SBI report : Enhancing Domestic Manufacturing
By expanding and extending PLI schemes, India can attract significant investments into its manufacturing sector. For instance, the electronics manufacturing sector has already seen a $2.7 billion boost through PLI initiatives, with expectations of attracting $7 billion in investments and creating approximately 91,000 jobs over five years.
SBI report: Potential Challenges and Considerations
Navigating Global Trade Dynamics
The imposition of tariffs by the U.S. reflects a shift towards protectionist policies. India must navigate these dynamics carefully, balancing the need to protect its industries while remaining compliant with international trade norms.
SBI report: Ensuring Effective Implementation
While the expansion of PLI schemes presents opportunities, effective implementation is crucial. Addressing regulatory and administrative challenges will be essential to realize the full potential of these initiatives.
Conclusion
The SBI report provides a strategic roadmap for India to bolster its industrial competitiveness in response to U.S. tariffs. By expanding and extending PLI schemes, diversifying export markets, and strengthening domestic manufacturing, India can position itself favorably in the evolving global trade landscape. Proactive policy measures and effective implementation will be key to navigating these challenges and seizing emerging opportunities.
Source: ANI
