With $87.4 billion, of the $322-billion merchandise exports in 2024, coming from the US alone, which has threatened to slap 25% duties on our shipments from April 2, is our largest trading partner with 27% of all exports. Of this, domestic companies have shipped goods worth $87.4 billion to the US, up 4.5% from 2023, while we imported goods worth $41.8 billion, up 3.4% from them, taking the bilateral trade to close to $130 billion. But with reciprocal tariffs getting kicked off from next month (no word on services tariffs yet), exports face an uncertain future.
Amidst this rising uncertainty, the Export and Import Bank of India (Exim Bank) has held discussions with exporters and also provided their inputs to the commerce ministry on the potential impact of the duty hikes on our exports, which will be significant, Deepali Agrawal, deputy managing director, Exim Bank, tells TNIE’s Benn Kochuveedan. Edited excerpts:
The US has announced 25% tariffs on our goods exports. What is Exim Bank’s assessment of the impact of the trade war on our exports?
A lot of work is being done because the majority of our exports are to the US. Since the US is our largest trading partner, it will have a significant impact. The exact impact will depend on what the demands are coming in from their side. The problem is that our exports are too concentrated in the US. We have given our inputs to the government on the impact of the reciprocal tariffs that the US will be imposing on our goods from April 2. We’ve also held discussions with exporters.
What are the suggestions you have given to the ministry?
I can’t give you the specifics of what we have told the government. But our view is that we must diversify our export basket to other markets like Latin America, Africa, the Middle East, Southeast Asia, where we see a lot of interest for our goods. The point is that shifting or diversifying our focus to other markets should not be merely because of issues with the US. It should be done for the long-term benefits so that issues in one market should not upset our trade in the future. As part of our outreach, we have just opened an office in Sao Paulo, Brazil. We already see a lot of interest being generated from that office.
What is your assessment of the likely dumping by China as it also fights higher US tariffs?
The biggest dumping threat will come from Chinese steel mills, which have already been dumping for quite some time. The government has already announced investigations on this.
Which are the sectors that will be hit the hardest?
The biggest impact will be on pharma as our companies have the maximum exposure to the US market (around 43% of general medicines sold in the US are made by our companies). Another sector that will have a significant impact will be textiles. Engineering goods will also be impacted.
Is the bank seeking capital infusion from the government this year or next as the ministry is pushing for $1 trillion merchandise trade?
We are well-capitalised now and so not looking for capital infusion from the government. In fact, for the next few years we don’t need extra capital to fund our business. Currently, our equity capital is Rs 20,000 crore and the capital adequacy ratio is 26. We have more than enough growth capital with us. Normally we borrow $3 billion annually, of which 70% are from overseas markets, mostly in dollars, and the rest from domestic sources. But since the pandemic our project export finance, which is around 40% of our assets, has been slowing. Thankfully it has started a marginal revival. This fiscal we’ve raised only $1 billion in debt and there is no need for funds now. We have an outstanding dollar debt of $3 billion now.
What is your target for exports this fiscal and the next?
Our export forecast for this fiscal is around $446.5 billion. Of this we have reached already $397 billion as of January. February data is not out yet. For the next fiscal, assessment will be done next month.