Trump’s Tariffs and how “Atmanirbhar Bharat” can do a “Solar Namoste” with “ Niryat labh ” to provide “Urja” for “Viksit Bharat” !
Guest article by CA Sandeep Deshpande, CFO of a Solar Structures company
Navigating economics in today’s turbulent times is a tightrope exercise for governments across the globe, given the various geopolitical considerations at play since the Russia–Ukraine war in 2022. This war has led to a polarization in global alliances, followed by the West Asia crisis at the end of 2023, and increasing conflicts across the globe by 2024–25. This is where politics and economics converged around crude oil dynamics.
This situation has led nations to balance energy needs with their stance on geopolitical situations, and like other nations, India took steps in the interest of its own national economic security.
Impact of US Tariffs on India
The Trump Administration imposed tariffs in August 2025 on several countries, including India. These tariffs have strong potential to impact our competitive advantage in the US markets, especially given the scale of tariffs is 50% or more for India, while many Southeast Asian economies — Malaysia, Philippines, Thailand, Indonesia, Japan, Sri Lanka, Bangladesh, etc. — face tariffs in the range of 15% to 20%.
As of now, there is only a lukewarm possibility of a constructive Indo–US Trade deal in the near future due to the volatility in the stance of the Trump Administration.
Economic Pressures on India's Balance Sheet
These factors have intensified the pressure on the country’s balance sheet, particularly for exporters facing clients who now find Indian imports prohibitively costly or non-accretive to their margins. The biggest challenge for the Indian economy is also managing:
Fiscal deficit
Forex reserves
High import of crude: 89% of our crude is imported as of end 2024–25
Annual spend of $161 Billion on crude alone in 2024–25
This situation will only worsen unless India expedites its renewable energy goals (especially solar) from 2030 to 2028.
Impact of Currency Depreciation
The depreciating rupee against the US dollar (INR depreciated by ~2% between 6th July 2025 [₹1 = $85.5] to 6th August 2025 [₹1 = $87.73]) further impacts our forex reserves and risks widening the fiscal deficit.
Estimates suggest that each ₹1 drop in the rupee’s value could raise the annual oil import burden by ₹8,000–10,000 crore, assuming stable import volumes and crude benchmarks. This increased burden puts further pressure on forex reserves.
GDP Recalibration
Many estimates for India’s GDP growth in FY26 are being revised down to 6.2% from an earlier estimate of 6.5%, which is non-accretive for the "Viksit Bharat" growth journey.
Challenges as Opportunities for Transformation
In the Indian context, this set of challenges can be converted into an opportunity for transformation, particularly in the energy sector, to manage key macroeconomic indicators such as:
Inflation
Foreign exchange reserves
Balance of payments
Fiscal deficit
GDP growth
The Case for Solar Energy
Even on a stand-alone basis, the case for solar energy holds strong merit based on LCOE (Levelized Cost of Energy). Solar energy — particularly utility-scale solar PV — is:
Significantly cheaper than thermal and crude-based power
Financially viable
Environmentally superior
According to Ernst & Young (EY), solar PV's global weighted average LCOE is 29% lower than the cheapest fossil fuel alternative.
India's Solar Potential
India has a solar potential of 750GW (Niti Aayog data), but as of 30th June 2025, only 116.25GW of installed capacity exists. This leaves an untapped potential of 600+ GW.
This could lead to:
Permanent reduction in crude oil dependence
Better management of forex reserves and fiscal deficit
Seamless GDP growth
Policy Recommendations
To support this transformation, the following direct and indirect policy recommendations are proposed:
1. Renewable Energy Fund under Companies Act, 2013
Constitute a "Renewable Energy Fund" under Schedule VII.
Mandate 50% of eligible CSR spend u/s 135 to be directed to this fund.
Incentivize corporates with 0.25% rebate on corporate tax in the subsequent year.
2. Climate Bonds for Capital Gains
Allow taxpayers to invest in 5-year climate bonds (coupon up to 2%) for capital gains over the ₹10 crore cap under Sections 54 and 54F.
Extend benefits similar to Section 54EC bonds.
3. FEMA Relaxations for Exporters
Allow a 3-month additional period under FEMA to bring in export proceeds from the USA for FY26–FY29.
Permit non-fund-based instruments with tenor >180 days.
Offer interest subvention for pre/post shipment credits.
Extend term loan repayment to 10 years with up to 1-year moratorium.
Eligibility:
No default in past 3 FYs
Minimum ₹2 crore annual average corporate tax paid in past 3 FYs
Clear CIBIL and EDPMS records
4. TreDS Expansion via Gift City
Extend TreDS access to all exporters, not just MSMEs.
Leverage Gift City’s international banking for competitive rates.
Provide A-rating default for eligible exporters to enable better terms.
5. FDI Incentives for Renewables
Tax dividends at 7.5% (instead of 10% or 20%) under Sections 115A, 115AC, 115E.
For US FDI, offer a 5% tax rate on dividend if:
Lock-in of 5 years
Meets minimum investment and job creation criteria
6. Employment Incentives – Section 80JJA
Increase deduction from 30% to 35%
Extend benefit from 3 to 5 years
Applicable to exporters with turnover above ₹50 crores.
Conclusion
All the above measures can infuse confidence, create a level playing field for exporters, and help India build a resilient clean energy platform. By supporting renewable energy investments and policy initiatives, India can manage macroeconomic challenges and drive long-term, sustainable GDP growth.
Guest article by CA Sandeep Deshpande, CFO of a Solar Structures company
Well said Sandeep, great insights!
Great read insightful