Global trade conditions over the past year have turned increasingly restrictive. Major economies such as the United States, the European Union, and China have raised tariffs, tightened export controls, and leaned more heavily on trade-remedy measures. For India, this shift has arrived at a sensitive time, with exports already navigating weak global demand and currency volatility.

As Budget 2026–27 draws closer, exporters from sectors most exposed to tariffs are asking the government to recalibrate policy support. Their concern is not theoretical. Higher import duties on inputs and steeper tariffs in key export markets are compressing margins across manufacturing value chains, particularly for firms with limited pricing power.

At the same time, diversification efforts by import-dependent economies are creating openings for Indian suppliers, especially in electronics, auto components, engineering goods, and select chemicals. According to Gautam Khattar of Price Waterhouse & Co LLP, these opportunities are real but conditional: only companies that can meet scale, quality, and compliance standards will benefit.

Indian exporters are being hit from both ends. On the domestic side, higher customs duties on imported raw materials, intermediates, and capital goods are pushing up landed costs. This is particularly visible in electronics, automobiles, pharmaceuticals, specialty chemicals, machinery, and renewable energy equipment.

Externally, tariff hikes in the US have sharply altered competitiveness. In some product categories, duties have reportedly doubled from 25 percent to 50 percent since mid-2025. Sectors such as textiles and apparel, gems and jewellery, leather, chemicals, and auto components have felt the impact most acutely, as higher tariffs have made Indian products more expensive relative to competing suppliers.

In response, industry groups are converging on a common set of budget demands: lower import duties on critical raw materials, simplified trade procedures, continued MSME-focused export support, and measures to ease cash-flow pressures. Clean-energy incentives and technology upgrades are also emerging as a central theme, driven by both cost considerations and compliance with global sustainability norms.

Exports remain a crucial buffer for India’s growth, particularly when domestic demand softens. Persistent cost pressures risk eroding India’s hard-won market share just as global buyers look to diversify away from concentrated supply chains.

Khattar argues that targeted, production-linked incentive-style support for tariff-exposed sectors, combined with simplified customs processes and deeper digitisation, could help firms absorb higher input costs while continuing to invest in capacity and technology. The logic is straightforward: without scale and productivity gains, Indian exporters will struggle to compete in a tariff-heavy world.

The government has already taken some steps. The Export Promotion Mission, backed by an outlay of ₹25,060 crore, includes an interest subvention scheme aimed at improving access to affordable credit for MSME exporters. Industry, however, believes implementation gaps remain.

For engineering goods, MSMEs dominate the export landscape. Pankaj Chadha of EEPC India has flagged concerns that the new interest subvention scheme does not clearly cover all MSMEs, particularly those in the steel segment under Chapter 72. He argues that excluding this chapter adversely affects downstream engineering exporters, most of whom are small firms.

EEPC India has also called for stronger incentives to help MSMEs invest in clean energy. Chadha has proposed allowing 100 percent depreciation on rooftop solar installations for MSMEs, compared with the current cap of 25 percent. Such a move, he argues, would improve cash flows, accelerate renewable adoption, and help exporters achieve better Carbon Border Adjustment Mechanism scores in markets like the EU.

Despite tariffs of 25–50 percent on steel and aluminium products in the US, Chadha expects Indian engineering exports to grow 4–5 percent to around $120 billion in 2025–26, supported by diversification into new markets.

The US remains the largest destination for Indian textile and apparel exports, accounting for about 28 percent of revenues in FY25. With exports of roughly $11 billion, any tariff-driven slowdown has outsized implications.

Ashwin Chandran of Confederation of Indian Textile Industry says the sector needs policy backing to meet India’s long-term ambition of building a $350 billion textile and apparel industry by 2030. Proposals include removing import duties on cotton fibre, revising cotton MSP formulas to align with global prices, and creating a Cotton Price Stabilisation Fund.

Executives such as Suketu Shah of Vishal Fabrics Ltd point out that recent budgets have helped through GST rationalisation, PLI expansion, and PM MITRA Parks. Looking ahead, the focus is on machinery modernisation, R&D funding, export credit access, and smoother trade processes.

The gems and jewellery sector faces one of the sharpest shocks. The US accounts for nearly one-third of India’s exports, valued at about $9.23 billion in FY25. With US tariffs at 50 percent since mid-2025, demand has weakened. Exports to the US fell nearly 44 percent between April and November 2025, while cut and polished diamond shipments dropped almost 59 percent year-on-year.

Sabyasachi Ray of Gem and Jewellery Export Promotion Council told Moneycontrol that higher retail prices in the US have led to cautious buying and delayed orders, directly hurting Indian exporters.

The sector acknowledges recent policy support, including priority-sector recognition under the Export Promotion Mission and smoother bullion imports via IIBX. For Budget 2026–27, it is seeking duty rationalisation on diamonds and gemstones, improved duty drawback mechanisms, support for lab-grown diamonds, and more flexible SEZ rules.