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A potential trade war between the United States (US) and China under the Donald Trump presidency could create an additional $25-billion export opportunity in the US for Indian exporters, the Federation of Indian Export Organisations (FIEO) said on Thursday during a pre-Budget consultation at the Finance Ministry with FM Nirmala Sitharaman and government officials.
India’s apex trade body highlighted the need for targeted measures to seize this opportunity. These include a marketing scheme with a corpus of Rs 750 crore spread over three years, the continuation of the Interest Equalisation Scheme (IES), and enhanced tax deductions of 200 to 250 per cent for R&D spending under Section 35(2AB) of the Income-Tax Act.
FIEO identified the largest potential gain of $10 billion in the consumer electronics sector, where US firms are moving away from reliance on Chinese components due to security and trade concerns. India, already a prominent player in mobile phone assembly, stands to benefit significantly as global brands increasingly outsource production to the country, exporters said.
Other sectors with substantial opportunities include textiles and garments, toys and games, chemicals, footwear, and furniture, each representing a $1 billion export potential. The automotive components sector could see an additional $1.5 billion in exports, exporters told the Finance Ministry.
FIEO also emphasised that rising input and freight costs have increased the burden on exporters, that now require extended credit periods to meet buyers’ payment timelines. IES has been a key tool in mitigating these challenges. This comes amid continued attacks in the Red Sea region, forcing global shipping lines to take longer routes.
“The IES has provided a level playing field for exporters, enabling them to compete with global counterparts. Between 2015 and 2024, India’s exports under IES grew at a compound annual growth rate (CAGR) of 6.6 per cent, compared to global merchandise trade growth of 4.4 per cent. Extending IES would further bolster exports in critical sectors such as textiles, leather, chemicals, and engineering goods,” FIEO said.
The IES is currently only available till December 31, 2024, and for manufacturers in micro, small and medium enterprises (MSMEs) with an annual cap of Rs 50 lakh per importer-exporter code (IEC) holder, which is insufficient for many MSMEs, FIEO said.
The trade body also pointed out that China, India’s major competitor, offers extensive subsidies and low-interest financing to its exporters, giving them an unfair advantage in global markets. Additionally, regional competitors like Vietnam, Thailand, and Indonesia benefit from favourable exchange rates and lower financing costs. FIEO warned that without extending IES, “India risks losing market share” to these emerging players.
Exporters also raised concerns about disruptions in the Red Sea region, noting that most of India’s international trade relies on foreign shipping lines. MSME exporters, in particular, remain vulnerable to high freight charges and supply chain disruptions.
“We remit over $100 billion annually in transport service charges, with shipping freight being a significant component. We welcome the Shipping Corporation of India’s move to acquire additional fleets but urge the government to infuse more equity into it or encourage private sector participation. Building a robust domestic shipping line will ensure greater resilience in our trade logistics,” FIEO said.
