India's garments sector faces tariff challenge, country needs bold reforms: GTRI's Ajay Srivastava

New Delhi [India], August 1 (ANI): With the US administration under President Donald Trump imposing 25 per cent tariffs on Indian goods plus an unspecified 'penalty', India's textile and garment sector is likely to face stiff competition from Bangladesh and Vietnam, who have been hit with comparatively lower tariffs, Ajay Srivastava, founder of trade think tank Global Trade Research Initiative (GTRI), has said.

"Bangladesh and Vietnam are big players in garment exports and have a better tariff position than India. This puts our textile and garment industry at a disadvantage. The same concern extends to leather goods," Srivastava told ANI in a product-wise analysis of the US tariff impact.

While labour-intensive sectors like textiles and leather are expected to feel the heat, India's auto components, steel, and aluminium industries are likely to remain relatively unaffected, as the tariff levels on these items are broadly comparable across competing nations, he argued further. Critical sectors such as pharmaceuticals, electronics (including smartphones), and petroleum products have been kept exempt from the fresh tariff measures, he claimed.

Overall, India has a 6-8 per cent disadvantage in comparison to other key Asian countries competing for market share in the US, according to Srivastava.

To deal with this challenge, Srivastava argued that India must move beyond tariff negotiations and trade agreements, and instead focus on bold domestic reforms.

"If we manufacture good quality products at competitive prices, they will sell -- with or without a trade deal. Look at China, it exports massively without relying on trade agreements," he said.

He recommended a strong focus on reducing the cost of manufacturing and improving ease of doing business.

"Internal reforms are now essential. It's time for serious measures," he added.

Srivastava also cited the European Union's upcoming Carbon Border Adjustment Mechanism (CBAM), effective from 2026, as an example of growing global protectionism.

He suggested India diversify revenue sources by boosting tourism, which he said could offset tariff-related export losses.

"Tourism has the potential to generate double the revenue we may lose from US tariffs," he said.

Over the past few months, India and the US have been negotiating for an interim trade deal, but there were some reservations from the Indian side on the US demand for opening up the agricultural and dairy sectors. Agriculture and dairy are critical for India as these two sectors provide livelihood opportunities to a large section of people.

On Wednesday, President Trump announced the imposition of 25 per cent tariffs on Indian goods plus an unspecified penalty, even as there were hopes of an interim India-US trade deal that would have otherwise helped avoid elevated tariffs.

India and the US initiated talks for a just, balanced, and mutually beneficial Bilateral Trade Agreement (BTA) in March this year, aiming to complete the first stage of the Agreement by October-November 2025.

On April 2, 2025, President Trump signed an executive order for reciprocal tariffs on various trade partners, imposing varied tariffs in the range of 10-50 per cent.

He subsequently kept the tariffs in abeyance for 90 days, while imposing a 10 per cent baseline tariff. The deadline was to end on July 9, and the US administration later pushed it to August 1.

US President Donald Trump had imposed reciprocal tariffs on dozens of countries with which the US has a trade deficit. Since assuming office for his second term, President Trump has reiterated his stance on tariff reciprocity, emphasising that the United States will match tariffs imposed by other countries, including India, to "ensure fair trade".

On Thursday evening, Commerce and Industry Minister Piyush Goyal made a statement in both houses of the Parliament, stating that the government is examining the impact of tariffs and will take all necessary steps to safeguard the national interest. (ANI)

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