Topic: Changes in industrial policy and their effects on industrial growth.
Q5. Evaluate the economic impact of the recent US tariff hike on India’s textile exports. Examine the role of domestic policy distortions in aggravating the crisis. Suggest structural reforms to restore competitiveness. (15 M)
Difficulty Level: Medium
Reference: IE
Why the question
The recent 50% US tariff hike on Indian textile exports, especially affecting Tamil Nadu’s knitwear and home textile hubs, raising concerns over export competitiveness and employment.Key demand of the question
To analyse the economic effects of the US tariff hike, explain how domestic policy distortions have worsened the situation, and suggest structural reforms to restore India’s textile export competitiveness.Structure of the Answer:
Introduction
Brief context on India’s textile export dependence and vulnerability to tariff shocks.Body
- Economic impact of the US tariff hike – Fall in US orders, loss to competitors, revenue contraction, job risks, idle capacity.
- Role of domestic policy distortions – GST inversion, cotton import duty, logistics inefficiency, lack of trade pacts, credit access gaps.
- Structural reforms to restore competitiveness – Tax rationalisation, trade deal negotiations, credit support, product diversification, logistics improvement.
Conclusion
Forward-looking note on combining external trade diplomacy with internal cost correction for long-term resilience.
