Context: The imposition of reciprocal tariffs has sparked concerns for India’s micro, small, and medium enterprises (MSMEs), particularly those operating in export-reliant sectors such as textiles, auto components, and gems & jewellery. These sectors have limited financial resilience to absorb global shocks and reorient business strategies swiftly. Lenders Explore Risk-Sharing Mechanisms State-owned lenders, including SBI, are considering revisions in credit guarantee schemes to de-risk MSME lending during this volatile trade environment. Discussions may be held with the Union Government to improve: This would provide comfort to lenders while enabling MSMEs to access working capital without increasing default risks. Sectoral Exposure and Relative Advantage While certain industries may face immediate headwinds, India’s SMEs could gain relative advantage over exporters from countries like China, which face higher tariff rates from the U.S. However, to capitalize on this, incentives and infrastructure support will be critical. Industries such as pharmaceuticals are currently exempt from reciprocal tariffs and remain strong contributors to India’s export mix. Lending and Growth Data As per RBI’s latest data (February 2025): Export Exposure and Policy Fluidity India’s exports to the U.S. form ~4% of GDP, implying limited direct macroeconomic impact. However, SBI Research notes collateral risks due to: A one percent reduction in reciprocal tariffs to 26% for India offers marginal short-term relief, but the broader policy direction from Washington remains uncertain. Strategic Actions Ahead Key stakeholders, including industry associations, banks, and the government, plan to formulate coordinated action plans after further data emerges in the coming fortnight. These could include: Outlook and Considerations With India’s exports to the U.S. already on a declining trend since FY23, and the top 15 export items accounting for 63% of total U.S.-bound trade, the near-term focus will be on: BS

Context: The Office of the U.S. Trade Representative (USTR) has criticized India for maintaining an “uneven playing field” in its insurance sector, specifically targeting Life Insurance Corporation of India (LIC) for: LIC’s Rebuttal LIC, India’s largest state-owned life insurer, responded with a firm denial of any special treatment or competitive edge derived from sovereign backing. The key arguments made include: Competitive Landscape: Numbers Tell the Story LIC underscored that its leadership is not due to privileges but due to structural strengths: Broader Implications While LIC is making a credible case that it plays by the same rules as private players, the USTR’s concerns raise critical questions: Strategic Signal from LIC In its closing remarks, LIC called for a “more balanced and factual appreciation” of its role in India’s financial ecosystem, emphasizing its contributions to financial inclusion, policyholder protection, and transparent governance. BS

Context: The recent wave of reciprocal tariffs imposed by the US on major economies with India facing lower relative tariffs could lead to: SBI’s View State Bank of India (SBI) suggests that: This may benefit consumers in the short term but could harm domestic manufacturers and require policy response. UBS Outlook According to UBS: Rate Policy Timeline Emkay Global’s Warning Emkay Global sees material downside risks to India’s 6.5% GDP growth forecast for FY26, citing: The report also highlights that RBI and other EM central banks will need to manage conflicting forces in financial markets, even as they adopt a more dovish stance. BS

Context: India’s micro, small, and medium enterprises (MSMEs) remain highly exposed to trade policy disruptions, particularly the U.S. tariff hikes. Sectors such as textiles, auto parts, and gems & jewellery, where MSMEs have a significant footprint, are particularly sensitive due to: Lenders Push for Risk Mitigation through Credit Guarantee Reform Banks are actively considering modifications to credit guarantee terms to cushion MSMEs from tariff-driven credit risks. The proposal involves: The aim is to reduce lender hesitation in funding vulnerable enterprises during a time of external trade pressure. Relative Advantage Amid Global Shifts Lending Trends and Sector Exposure According to RBI data (February 2025): These figures suggest healthy credit demand, but underlying risks may increase if trade barriers remain or intensify. Sectoral Safeguards and Policy Fluidity The pharmaceuticals sector, a major export contributor, has been kept outside the tariff regime. However, policy inconsistency from the U.S. adds uncertainty across other key sectors. Textiles, with high export value and employment potential, is flagged as a priority area for risk monitoring and stakeholder consultation. Government-Lender Coordination Underway Public sector banks are engaging with government officials, MSME units, and trade bodies to: These consultations will shape medium-term strategies as the situation remains fluid. Trade Impact: Contained Direct Hit, Broader Collateral Risks SBI’s internal research shows that exports to the U.S. account for just ~4% of India’s GDP, indicating a limited direct macroeconomic impact. However, broader risks loom: The top 15 items exported to the U.S. represent 63% of the value, amplifying the importance of focused policy for these sectors. TET