Empowering Micro & Small Businesses: Leading Trade Economist Urges Critical Govt Support through PLI for Tariff Relief
There is an urgent call for government support in labor-intensive sectors severely affected by the new 50% punitive tariffs, reminiscent of Donald Trump’s policies, which took effect today, according to a leading trade economist. Biswajit Dhar, a former professor at Jawaharlal Nehru University, highlighted that industries such as gems and jewellery, textiles, and marine products are experiencing significant challenges, particularly in coastal states like Kerala. With the country grappling with rising unemployment, Dhar stressed the necessity of timely and effective government intervention, drawing parallels to the Production Linked Incentive (PLI) scheme that has been implemented for India’s manufacturing sector.
Launched in 2020, the PLI scheme was designed to enhance domestic manufacturing by offering performance-based incentives aimed at attracting investments and boosting global competitiveness. This initiative has been pivotal in generating jobs, increasing exports, and reducing dependency on imports. Dhar pointed out that the micro and small enterprises are facing what he termed the “third big blow” in a decade, following the disruptions caused by the Goods and Services Tax (GST) and the COVID-19 pandemic. He emphasized that many in these sectors are self-employed, necessitating additional financial support from the government to prevent their collapse.
The impact of these tariffs on unemployment remains a point of contention. While Dhar believes it’s premature to quantify the effects, he indicated that labor participation might drop to 40-45% of pre-pandemic levels, down from the current mid-50s. He noted that many workers in the affected sectors are self-employed, complicating traditional definitions of unemployment. Despite a reported overall decline in India’s unemployment rate to 3.2% for 2022-23, recent data from May 2025 marked an increase to 5.6%, largely driven by rising youth unemployment, particularly in rural and urban areas.
The tariffs are not only impacting traditional sectors but also threaten India’s pharmaceutical and smartphone industries. The US relies heavily on Indian pharmaceutical companies for cost-effective production of generics, significantly benefiting the US healthcare system through lower drug prices. Disruption in this supply chain could impede access to affordable medications in the US. Additionally, India has recently become the leading exporter of smartphones to the US, surpassing China, particularly due to Apple’s shift in manufacturing to India. According to a report by Canalys, imports of smartphones made in India to the US rose sharply to 44% in the second quarter of 2023, up from just 13% the previous year.
Dhar also raised concerns about the future of the gems and jewellery trade, which accounted for $10 billion of Indian exports to the US in 2024-25. With the US representing 20% of India’s merchandise exports, the elevated tariffs threaten the competitiveness of Indian exporters in this crucial market.
The onset of these tariffs poses significant challenges for several sectors in India, necessitating urgent and decisive action from the government to avert far-reaching economic consequences. As India navigates this tumultuous landscape, the intersection of trade policy and domestic economic stability will remain a focal point for policymakers and industry stakeholders alike.
Original Source: https://www.livemint.com/news/us-tariffs-govt-assistance-on-the-lines-of-pli-critical-for-micro-small-sectors-says-leading-trade-economist-11756289303184.html
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Publish Date: 2025-08-27 17:23:00
