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Tariff Pain, Tomorrow's Gain?
Good Morning. The tariffs imposed on India by Donald Trump will be hard on India’s small and medium businesses that export to the US. But this crisis could jolt bigger transformations. The government could turn the tide through technology upgradation, better financing and tie-ups with global trading giants to help local businesses. The right moves could turn today’s tariff pain into tomorrow's competitive gain.
In other news, S&P Global upgrades India’s credit rating, an encouraging sign for India’s economic outlook. Meanwhile, passenger vehicle sales dipped slightly as industry body shows “cautious optimism” for the upcoming festive season.
India Must Turn Trump’s Tariff Crisis Into Opportunity To Push Local Industry
The world turns its attention to the meeting on Friday in Alaska between US president Donald Trump and Russian president Vladimir Putin on a possible end to the war in Ukraine.
Much rides on the outcome of the talks for India as well: if the outcome of the talks paves the way for the removal of sanctions on Russian exports, India would see the additional layer of 25% tariffs that Trump has levied on India, on account of its oil purchases from Russia, melt into thin air.
That would bring down India’s tariff handicap vis-à-vis competitors significantly: the base tariff on India is 25%, while the rates on countries that compete with India are around 19-20%, so that Indian exporters have to lower their costs by just 5-6% to compete with exporters from the likes of Bangladesh and Pakistan.
Capital Cure
Small and medium Indian enterprises that stand to lose sales in the US, as a result of the Trump tariffs, have been lobbying the government for relief. There is a case for the government to address their distress, but government support should take forms that lower their costs and improve efficiency.
One sensible measure would be to set up a technology upgradation fund of the kind that had majorly boosted the productivity of the textile sector in the past.
Productivity is not enhanced by workers slaving away for longer hours for lower wages, as some of our Industry leaders imagine.
Turn Crisis Into Opportunity?
Two other forms of support are possible. This is to help India’s SMEs expand sales abroad through large trading companies, on the lines of Japan’s Mitsui and Marubeni. Their scale and reach are immense, and smaller firms that make use of them get market access that they never could on their own.
Amazon and WalMart do help Indian small companies export abroad. The government could offer them reduced hindrance to their operations in India, in return for active promotion of Indian small industry exports. The government could encourage large Indian companies to create trading arms that would help in this effort as well.
But the biggest boost for MSMEs would be in the form of greater access to institutional credit and support in prompt payments.
How can that be fixed?
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CORE NUMBER
340,772
That’s how many passenger vehicles automotive companies sold in July 2025 – a 0.2% decline from last year, when they sold 341,510 units. Rajesh Menon, director general of the Society of Indian Automobile Manufacturers (SIAM), said in a press release that except passenger vehicles, where demand was subdued, all the other sectors showed a stable performance.
Total Production of Passenger Vehicles, Three Wheelers, Two Wheelers, and Quadricycle in July 2025: 26,98,519 units
Breakdown of sales:
🚗 Passenger Vehicles: 3,40,772 units sold (sales dropped by 0.2% YoY)
🛺 Three-wheelers: 69,403 units (sales grew by 17.5% YoY)
🏍️ Two-wheelers: 15,67,000 units (sales grew by 8.7% YoY)
SIAM said it feels cautiously optimistic about the festive season beginning later this month with Onam.
FROM THE PERIPHERY
India’s Credit Upgrade
S&P Global, a leading credit ratings agency, upgraded India’s long-term sovereign credit rating from the lowest investment grade ‘BBB-’ to ‘BBB’, making India a lower-risk borrower. It also raised India’s short-term credit rating from A-3 to A-2, signalling that it saw India as more reliable in the near-term too, to handle short-term foreign borrowing, trade financing, and manage external shocks.
Setup: S&P cited India’s strong GDP growth and the government’s commitment to reducing the government deficit, for why it upgraded the country. It added that India’s strong domestic consumption bolsters the economy and that its exposure to the US’s tariffs would be limited to 1.2% of its GDP. This bodes well for India’s economic outlook.
The Context: Western countries like the US and the UK have a much higher rating of AA+ and AA, respectively. But India’s rating is better than that of its neighbours. Bangladesh’s rating is B+, signalling high risk, and Pakistan’s is B-, which is also higher risk.
Delivery Firms Face Heat
India’s Competition Commission (CCI) has re-opened scrutiny into last-mile delivery firms FedEx, UPS, Aramex, DHL, and DTDC in a 2022 price-collusion case, after allowing the Federation of Indian Publishers—whose members include S. Chand, Rupa Publications, and Pan Macmillan—to cross-examine their top executives. The publishers allege the companies coordinated to set delivery rates and kept fuel surcharges high even when jet fuel prices fell.
Backstory: This rare step comes months after the courier majors were given a clean chit, with the CCI’s earlier probe finding “no evidence” of collusion. The publishers argue the earlier probe relied too heavily on oral statements and ignored inconsistencies in testimonies. Cross-examination, rarely permitted in Indian anti-trust cases, could unearth new facts and overturn the earlier findings, potentially delaying resolution by months.
What's Next? The renewed probe comes as India’s $14.3 billion parcel delivery sector, buoyed by booming e-commerce, attracts both global and domestic players. The outcome could reshape competitive dynamics in a market that has already seen intense scrutiny globally.
Wholesale Prices Decline
India’s wholesale prices fell 0.58% year-on-year in July, widening from a 0.13% drop in June, driven largely by falling food prices, according to the Ministry of Commerce and Industry. Wholesale food prices declined 2.15%, with vegetable prices plunging 28.96% compared to a 22.65% fall last month.
By the Numbers: Fuel and power prices dropped 2.43%, while manufactured products rose 2.05% year-on-year. Economists polled by Reuters had expected a milder 0.3% decline in the wholesale price index.
What's Next? The sharp decline in food prices, particularly for vegetables, continues to weigh on overall inflation, even as core manufacturing prices remain stable, reflecting uneven trends across sectors in India’s wholesale market.
Trade Deficit Widens
India’s merchandise trade deficit widened to $27.35 billion in July, well above economists’ forecast of $20.35 billion and up from $18.78 billion in June, as imports surged despite rising exports, according to the latest numbers released by the government.
How We Got Here? Goods exports climbed to $37.24 billion from $35.14 billion in June, while imports jumped to $64.59 billion from $53.92 billion. In April–July, shipments to the US rose to $33.53 billion from $27.57 billion a year earlier.
Overview: The data comes days after Trump imposed an additional 25% tariff on Indian goods over Russian oil purchases, taking total US duties to 50% — among the steepest for any trading partner.
PODCASTS
How Do I Maintain My CIBIL Score?
Earlier this year, it was reported that a man didn’t get hired because of his poor CIBIL score. Another person was about to get married, but when the bride’s uncle checked his CIBIL score, the uncle decided to call off the wedding. Today, your CIBIL score isn’t just a number, it’s your financial reputation.
Still, many Indians aren’t aware of what their CIBIL scores are. A YouGov and CRED survey of over 5000 Tier 1 city respondents with at least one credit card found that 40% of surveyors were unaware of their credit score. 30% of them admitted to inadequate credit management knowledge.
In the latest episode of The Signal Daily, we’ll learn about what CIBIL scores are. How can you check it and what are the best practices for maintaining a good CIBIL score?
The Core produces The Signal Daily. Follow us wherever you get your favourite podcasts. To check out the rest of our work, go to www.thecore.in
On Episode 654 of The Core Report, financial journalist Govindraj Ethiraj talks to Puneet Gupta, Director - S&P Global Mobility, India & ASEAN. We also feature an excerpt from Puja Mehra’s recent interview with Neelkanth Mishra from our who How India’s Economy Works.
Will India join the global stock rally party?
Why you should not worry about Russian oil
Should India raise tariff barriers in these times?
Europe is seeing record temperatures again
The ethanol blending controversy
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