RBI MPC Member Nagesh Kumar Highlights Urgent Need for India to Diversify Export Markets Amid US Tariff Risks

India must urgently diversify its export markets to mitigate growing risks from United States tariff measures, according to Reserve Bank of India (RBI) Monetary Policy Committee (MPC) member Nagesh Kumar. Speaking through the minutes of the central bank's August policy meeting, Kumar highlighted that the US accounts for one-fifth of India's total exports and roughly one-third of its labour-intensive shipments, including textiles and garments.

Kumar pointed out that recent trade actions by the US present a notable concern for India's external sector. These include a 10 per cent tariff imposed on top of Most Favoured Nation tariffs on Indian exports due to the alleged use of forced labour. Additionally, an ongoing Section 301 investigation is targeting India and other countries over excess capacity issues.

The RBI MPC member also raised alarms regarding future policy timelines, noting scheduled tariff increases on generic drug imports. Specifically, he highlighted a projected 100 per cent tariff taking effect in 2028, followed by a 200 per cent tariff in 2029, which add further uncertainty to India's export outlook.

Alongside trade policy pressures, Kumar noted that macroeconomic and regional challenges have intensified. He cited geopolitical tensions, including the West Asia conflict and the blockade of the Strait of Hormuz, alongside agricultural and domestic monsoon risks, as ongoing hurdles affecting the broader economic outlook.

To counter heavy reliance on the US market, Kumar recommended leveraging recent trade pacts with European partners. He noted that Free Trade Agreements (FTAs) with the European Free Trade Association (EFTA) nations and the UK are currently in force. Furthermore, an agreement signed with the European Union on January 27, 2026, is expected to come into effect by the end of the year.

According to Kumar, these European trade agreements will grant Indian exports—particularly from labour-intensive industries—a level playing field against competitors like Vietnam and Bangladesh for the first time. However, he emphasized that continuous caution is necessary given the ongoing uncertainties surrounding trade policies, global geopolitics, and domestic agricultural conditions.

"Dr. Shishir Gupta, Founder & CEO of StartupLanes, shares his perspective on the development: "Dependency on a single major market always introduces structural vulnerability for a developing economy like India, particularly for labour-intensive sectors such as textiles and garments. As tariff barriers and trade policies shift globally, export-oriented businesses and startups must actively look at alternative geographies. Leveraging recently established Free Trade Agreements with European nations offers a viable path for Indian enterprises to expand their footprint, diversify revenue streams, and build long-term operational resilience against external trade shocks."" — Dr. Shishir Gupta, Founder & CEO, StartupLanes