The Government of India is preparing to launch a new credit guarantee scheme designed to support MSME exporters affected by recent US tariff hikes and to encourage diversification into new global markets. The move aims to ease financing constraints and protect small exporters navigating global trade uncertainty.
Officials said the scheme will provide credit guarantees for loans up to ₹100 crore, potentially modeled after the Mutual Credit Guarantee Scheme (MCGS) launched earlier this year for manufacturing MSMEs — but with simplified rules and a lower upfront deposit.
“In the MCGS, exporters have to deposit 5% upfront while applying for guarantee cover. Under the proposed new scheme, this could be reduced,” a senior official explained, adding that the structure is still under final review.
The plan comes as MSME exporters across sectors like shrimp, textiles, carpets, and gems & jewellery are hit by the 50% tariff increase imposed by the US, which came into effect on August 27, 2025. These industries, heavily dependent on American demand, face squeezed profit margins and rising shipment costs.
Impact of tariffs and sectoral resilience
Preliminary assessments by the Commerce Ministry indicate that the impact of US tariffs, though significant, may not be as severe as initially feared. For now, many importers continue sourcing Indian goods ahead of the festive season due to limited short-term alternatives.
“Despite higher costs, some importers are still buying from India, as shifting sourcing channels ahead of Christmas and New Year isn’t easy,” an official noted.
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Carpet exports have been particularly affected — nearly 60% of India’s ₹8,000 crore carpet exports go to the US. To mitigate the effect of such trade disruptions, the government plans to roll out the new scheme in the current fiscal quarter.
Simplified access and risk-sharing model
The MCGS currently offers 60% credit coverage by the National Credit Guarantee Trustee Company (NCGTC) to member lending institutions for loans up to ₹100 crore. It also includes a one-year waiver on guarantee fees, followed by 1.5% annually for the next three years, and 1% thereafter.
For exporters, officials are evaluating more relaxed terms — possibly reducing deposits, processing time, and compliance requirements to accelerate access to credit. This is expected to help MSME exporters sustain liquidity and maintain competitiveness in key overseas markets.
Strengthening MSME resilience
The initiative aligns with India’s broader trade strategy under Viksit Bharat 2047, emphasizing self-reliance and export diversification. By expanding access to affordable credit and simplifying guarantee procedures, the government aims to strengthen MSMEs’ ability to withstand global shocks while fostering inclusive economic growth.
The credit cover scheme could serve as a lifeline for thousands of small exporters seeking to expand their footprint beyond traditional markets, ensuring they remain globally competitive amid changing trade dynamics.