Kolkata, Aug 30 (PTI) Chief Economic Advisor (CEA) Anantha Nageswaran on Saturday said that the Centre, along with various stakeholders, was actively working overtime to cushion the export sector from the tariffs imposed by the United States.

The imposition of an additional 25 per cent tariff by the US has raised the overall duty to 50 per cent.

Speaking virtually at an event organised by the Indian Chamber of Commerce, he said crises, whether minor or major, often act as catalysts, providing focus and purpose for all segments of society -- including the government, private sector, and households -- to undertake necessary actions that might otherwise have been delayed.

Since the tariffs took effect on August 27, "conversations have been happening in the last three to four days" involving exporting bodies, private sector promotion agencies, and the ministries concerned, he said.

The Ministry of Finance and other ministries are "working overtime" to formulate a strategy, aimed at providing both a "time cushion" and a "financial cushion" for the affected sectors so they can "weather the present storm and also emerge stronger".

On the trade front, Nageswaran said a proposed agreement with the US, negotiated "in good faith" and close to conclusion, had been delayed due to "unexpected developments", though not denied.

He also referred to India facing a penal tariff for purchasing Russian crude oil, which the Ministry of External Affairs has described as unreasonable.

He expressed hope that tariffs would be "short-lived" and that "an understanding of the importance of the larger dimensions of the India-US relationship will eventually prevail".

The CEA highlighted several "silver linings" that point to a robust and improving economic environment.

India's real GDP grew by 7.8 per cent year-on-year in the first quarter of the current financial year, supported by the "GDP deflator", he said.

Nominal GDP growth came in at 8.8 per cent, exceeding private sector economists' fears of 8-8.2 per cent, he added.

Nageswaran attributed the lower nominal GDP growth compared to previous quarters to "good deflation" -- a decline in input costs such as crude oil, industrial metals, and raw materials -- while enterprises' pricing power remained intact.

The manufacturing sector's Gross Value Added (GVA) rose by 10.1 per cent in nominal terms and 7.7 per cent in real terms, reflecting its strength and providing hope that full-year nominal GDP growth will stay near the 10.1 per cent assumed in the Union Budget.

Nageswaran said a "huge tax cut" announced in February for middle and upper-middle-income households means a family of two earners with annual income up to Rs 26.7 lakh will pay no direct income tax, already visible in higher advance tax payments, he said.

Further relief is expected through rationalisation of GST rates, reduction in the number of slabs, and simplification of processes, he said.

He highlighted the employment-linked incentive scheme announced in the July 2024 budget, which rewards both employers and employees. For employees, it offers a one-time reward for taking up full-time jobs and assistance with relocation expenses, while employers receive cash incentives to continue hiring.

He said the scheme is crucial for striking the right balance between job creation and competitiveness in the age of AI.

The CEA noted India's credit rating upgrade by Standard & Poor's, the first in 30 years, and expressed confidence that other agencies such as Fitch may follow.

He underlined that fiscal prudence -- cutting the fiscal deficit from 9.2 per cent in 2021 to an estimated 4.4 per cent this year -- has reduced the 10-year bond yield risk premium from 500-600 basis points in 2014 to about 230-240 points now, even reaching a low of 180 points recently after it hardened a bit recently.

This has lowered borrowing costs for the government and contributed to a three-percentage point reduction in the cost of capital for the private sector over the last decade, he said.

Nageswaran said India is actively pursuing trade diversification through free trade agreements with countries such as the UAE and the UK, and ongoing discussions with Oman and Bahrain, some of which could materialise before the year-end.

Calling the current situation an opportunity, Nageswaran urged the private sector to diversify export destinations, be responsive to changing consumer preferences, invest in product innovation and R&D, and improve business practices to enhance competitiveness.

"Each one of us has an obligation to ourselves, society, our employees and our customers to use this opportunity to improve the way we do business and strive for innovation and excellence," he said.

He added that the government, on its part, is committed to doubling down on deregulation, improving ease of doing business, supporting job creation, and engaging with the US to resolve the tariff issue. PTI BSM ACD