Textile to basmati, Punjab exporters brace for impact

The 50 per cent tariff on Indian goods imposed by the US, which came into effect on Wednesday, has come as a jolt to exporters in Punjab. From textiles and auto components to leather goods and basmati, key industrial sectors in the state are facing an uncertain economic future. This tariff hike, a response to India’s purchase of Russian oil, threatens to significantly reduce exports, damage the financial health of local manufacturers and potentially trigger large-scale lay-offs.

Talking to The Tribune, Rajinder Gupta, chairman emeritus of the textile behemoth Trident Group, which exports over Rs 3,000 crore worth of goods to the US annually, said they were still analysing the situation. “The implications of the high tariff will be serious. We have a little hope for policy changes that could help mitigate the losses,” he said.

Most exporters in Punjab fall under the micro, small and medium enterprises (MSME) category and operate on very thin profit margins. They say the new tariffs will erase these margins entirely if they are to continue supplying the US market.

In Jalandhar, the hub of the leather goods industry, units with turnovers of less than Rs 100 crore that manufacture leather tool kits for the US now fear becoming economically unviable. Gaurav Sud, a prominent leather goods exporter, said these units would have no option but to explore new markets in Europe, Asia and Africa, presently being catered to by other manufacturers. “This shift will require them to undercut existing suppliers, a move that will hurt their competitiveness and ensure that everyone in the export business feels the heat,” he said.

Auto parts manufacturers have also begun negotiations with their US customers following the new tariff. A prominent exporter from Ludhiana said, “While exports were viable under a 25 per cent tariff, the new 50 per cent rate eliminates our advantage over Chinese suppliers, who pay only 30 per cent. To survive, we will have to severely cut our profits.”

The basmati rice industry is another major sector facing a crisis. Ranjit Singh Josan, vice-president of the Punjab Rice Exporters Association, said global uncertainty had deepened the crisis for basmati exporters. “The new tariff will severely hit our exports. Nearly 5 lakh metric tonnes (LMT) of basmati rice, about 7-8% of total exports, remain unsold across India. This existing stock, combined with the 3 LMT traditionally exported to the US and an expected 10 percent increase in the upcoming harvest, will create a supply glut of 15-16 LMT. This surplus will exert downward pressure on prices of the new crop in the coming season,” he warned.