India export diversification urged amid US tariffs

In the minutes of the State Bank of India's August policy meeting, Monetary Policy Committee member Rajesh Kumar urged India to urgently diversify its export markets amid growing US tariff risks. Kumar noted that the US accounts for one-fifth of India's exports and about one-third of labour-intensive exports such as textiles and garments. The US has imposed a 10% tariff on top of Most Favoured Nation tariffs on Indian exports due to forced labour concerns, and a Section 301 investigation is ongoing for excess capacity. Kumar also flagged future tariffs on generic drug imports: 100% from 2028 and 200% from 2029. He highlighted geopolitical risks including the West Asia conflict and the blockade of the Strait of Hormuz. To mitigate these risks, he pointed to recent trade agreements with European countries: FTAs with the European Free Trade Association and the United Kingdom are in force, and the agreement with the European Union, signed on January 27, 2026, is expected to come into force by end of 2026. These agreements could provide a level playing field for Indian exports in Europe versus Vietnam and Bangladesh, helping reduce dependence on the US market.