Uday Kotak Urges Indian Government to Support SMEs Amid Tariff Challenges
Indian billionaire Uday Kotak is advocating for the government led by Prime Minister Narendra Modi to enhance budgetary support for small and medium-sized enterprises (SMEs) as the economy grapples with the ramifications of high tariffs imposed by the U.S.
Kotak, who founded the third-largest private sector bank in India, aligns himself with other prominent business figures and industry groups in calling for urgent measures to help mitigate the effects of Donald Trump’s significant tariff rates.
“We need to shift from a comfortable mindset to one that acknowledges risk,” Kotak expressed during his conversation with the Financial Times.
This month, Trump enacted a 25% tax on India due to the country’s discounted oil imports from Russia, accusing it of supporting the war efforts of Ukraine’s leader, Vladimir Putin, alongside an additional 25% on mutual tariffs.
Kotak described these tariffs as a critical alarm, signaling a “big shock” to the Indian economy in the face of what he sees as an escalating trade confrontation.
He requested “direct financial support” from the government to energize SMEs involved in manufacturing and technology, suggesting measures like providing capital support and fostering an environment for private equity to thrive. “This will encourage more risk capital,” he indicated.
Earlier, Anand Mahindra, chairman of Mahindra Group, urged the government to enhance liquidity for SMEs and invest in infrastructure for manufacturers affected by U.S. tariffs.
Similarly, RPG Enterprise’s billionaire chairman, Harsh Goenka, has recommended that New Delhi aid exporters in exploring new markets and establish funds to incentivize manufacturing alternatives to China.
Last week, Modi committed to various tax and regulatory reforms aimed at reducing business burdens, which he believes are necessary for strengthening an “independent India.”
Yet, the ongoing U.S. tariffs pose a threat to Modi’s ambition of bolstering India’s manufacturing sector—currently contributing around 14% to the GDP, far below the targeted 25%.
Economists argue that the sector must maintain an average growth rate of 8% to meet Modi’s goals by 2047, marking a complete transition from colonial rule.
While economic growth showed signs of recovery, expanding by 7.4% in the previous year’s first quarter after a downturn, experts warn that the U.S. tariffs could diminish India’s growth by approximately 0.5 percentage points.
Kotak, a significant player in India’s financial landscape, oversees Kotak Mahindra Bank, which boasts a market valuation of $45 billion. His previous advisory roles with New Delhi reflect his deep involvement in economic policy.
He pointed out that the unpredictability of Trump’s tariff decisions creates an urgent need for India to adapt, presenting an opportunity for transformation.
“The macroeconomic climate in India remains stable,” Kotak noted. He emphasized that fiscal deficits and the current account are under control, urging businesses to leverage the trade conflict to enhance productivity and excellence.
He believes that manufacturing must occupy a central role in India’s economic future, stressing that businesses should not overly rely on the domestic market but rather strive for excellence on a global scale.
Kotak cautioned that India cannot remain complacent, as its current per capita GDP of $2,700 significantly lags behind China’s $13,300 and the United States’ nearly $89,000.
At this “cruise” level, he wonders if India can effectively navigate past the middle-income trap, stating, “I think there exists a gap.”
