India to roll out mega relief package for MSMEs hit by US tariffs

India’s government is preparing a large-scale relief package aimed at protecting micro, small, and medium enterprises (MSMEs) that have been severely impacted by the 50% tariffs imposed by the United States. According to initial estimates, these duties could cost Indian exporters between $45 billion and $80 billion, putting thousands of small firms at risk.

Five new schemes to cushion exporters

At the centre of this support framework are five new schemes, inspired by the COVID-era credit guarantee models but redesigned for current challenges. These schemes are expected to:

• Simplify access to working capital

• Double the limit for collateral-free loans from ₹10 lakh to ₹20 lakh

• Offer targeted interest subvention to reduce borrowing costs for struggling exporters

This financial assistance aims to ensure that small businesses can maintain liquidity and sustain operations despite external trade shocks.

Equity financing and sector-specific support

Unlocking growth capital

The package will not only provide loans but also open new avenues for equity financing, enabling MSMEs to raise funds without increasing debt burdens.

Industry-focused measures

Dedicated support windows will be rolled out for industries that are most vulnerable to the tariffs, including:

• Textiles and apparel

• Gems and jewellery

• Leather

• Engineering goods

• Agri-marine exports

These industries employ millions of workers, and targeted relief is seen as crucial to protecting livelihoods and export competitiveness.

Indirect tax reliefs for immediate liquidity

In addition to direct financial support, the government is also considering indirect tax measures to provide immediate relief. These include:

• Implementing recent GST cuts across key sectors

• Accelerating Input Tax Credit (ITC) refunds to free up cash flow for MSMEs

Such steps are expected to quickly inject liquidity into the system, helping small exporters manage short-term stress.

Exporters explore new strategies

The package is being positioned as a way to ease working capital strain, protect jobs, and give exporters time to adapt. Many MSMEs are already exploring new strategies to cope, including diversifying exports to alternative destinations and experimenting with near-shoring through Bhutan and Nepal to reduce risks associated with US market dependence.

Govt commitment to safeguard export-led growth

The government’s move highlights its resolve to protect India’s employment-intensive export sector from global disruptions. By offering a blend of credit, equity, tax relief, and industry-specific aid, policymakers are looking to ensure that MSMEs—responsible for nearly 40% of India’s exports and employing over 110 million people—continue to drive economic growth despite external pressures.

Conclusion

The upcoming relief package marks a critical intervention at a time when India’s MSMEs are grappling with one of the most severe challenges in recent years, triggered by steep 50% tariffs from the US.

By combining measures such as expanded credit guarantees, easier access to collateral-free loans, equity financing channels, faster tax refunds, and industry-specific assistance, the government is signaling a strong intent to safeguard millions of jobs and stabilize vulnerable businesses.

Beyond offering immediate relief, the initiative seeks to restore liquidity, ease working capital constraints, and give exporters the breathing space needed to diversify into alternative markets.

This approach not only shields MSMEs from global trade shocks but also positions them for long-term competitiveness. If executed effectively, the package has the potential to transform adversity into opportunity, reinforcing MSMEs’ role as the backbone of India’s economy and a key driver of sustainable export-led growth.