Billionaire Uday Kotak calls for urgent support to help India withstand US tariff shock
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Indian banking billionaire Uday Kotak has called on Prime Minister Narendra Modi's government to provide stronger budgetary support to small and medium-sized enterprises, warning that the country faces a 'major shock' from US tariffs Kotak, founder of Kotak Mahindra Bank , India's third-largest private lender, told the Financial Times that the tariffs introduced by US President Donald Trump had 'woken Indians up' to the vulnerabilities of the economy.'We must think about this as an opportunity for us to get out of our cruise mindset and from a comfort mindset to 'we are at risk',' he said.Trump recently imposed an additional 25 per cent levy on Indian imports, including discounted Russian oil, on top of existing 25 per cent 'reciprocal' tariffs. The US president has cited the oil imports as helping finance Vladimir Putin's war in Ukraine.Kotak said the Indian government should offer 'direct fiscal support' to 'turbocharge' small businesses in manufacturing, research, and technology. 'Once you give that capital support, private equity, entrepreneurs' equity [and] risk capital will come additionally,' he told FT.Kotak is not alone in urging government intervention. Earlier this month, Anand Mahindra, chair of the Mahindra Group, called for more liquidity for SMEs, infrastructure investment, and incentives for manufacturers.Harsh Goenka, chairman of RPG Enterprises, has also suggested that New Delhi create a fund to help exporters find new markets and attract manufacturers relocating from China.Prime Minister Modi has pledged a series of tax and regulatory reforms aimed at boosting business, including cuts to the goods and services tax and a reduction in bureaucratic red tape. The government frames these measures as part of its push for a 'self-reliant India.'Still, the steep US tariffs threaten Modi's goal of strengthening Indian manufacturing , which currently contributes around 14 per cent to GDP, well below the target of 25 per cent. Many economists say India needs to sustain GDP growth of roughly 8 per cent to meet Modi's long-term vision of developed economy status by 2047.The economy expanded 7.4 per cent in the first quarter year-on-year, but analysts warn that tariffs on exports to the US, India's largest trading partner, could reduce growth by almost 0.5 percentage points.Kotak, a highly influential figure in Indian finance, highlighted both the risks and opportunities presented by the tariff regime. 'The uncertainty of Trump's tariff regime has created a sense of urgency for transforming India,' he said. 'It is a great opportunity to pivot.'He also emphasised that India's macroeconomic fundamentals are strong. 'India's macroeconomic situation is very comfortable. Our fiscal deficit is under control, our current account is under control, you've got macroeconomic stability.'Kotak called on policymakers and businesses to use the trade shock to enhance 'productivity, efficiency, excellence and building world-class brands.' He stressed the importance of manufacturing and warned against relying solely on India's domestic market to avoid complacency.With India's per capita GDP at $2,700, far below China's $13,300 and the US's nearly $89,000, he argued the country cannot afford to remain in a comfort zone. 'At the current 'cruise' level, we'll keep on improving our position, but is it fast enough for us to get past the middle-income trap? I think there's a gap,' Kotak said.
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