Rattling the nuts and bolts in Ludhiana

It has been three days since the 50% tariffs on goods from India to the United States took effect. In Ludhiana’s bustling Phase IV of the city’s industrial hub, the steady hands of skilled workers sync with the clatter of machines on the ground floor of Sri Tools Industries, a manufacturer and exporter of hand tools. Meanwhile, on the first floor, the management team is holding a series of meetings to deliberate on cost-cutting and other measures to secure the company’s future. Sri Tools’ production has been hit by 30-35%. Ludhiana is Punjab’s manufacturing heartland.

In the first week of August 2025, the U.S. imposed an additional 25% tariff on India for its purchase of Russian oil, bringing the total levy to 50%. Following this, suppliers, manufacturers, and exporters in different sectors in Punjab are staring at an uncertain future as buyers in the U.S. have put import orders on an indefinite hold since the last week of August, when the tariffs kicked in.

“The immediate problem is: where do we sell our products? It’s difficult to find a new market instantly; it takes time, in fact, years. Fresh orders from buyers in America have almost stopped,” says Sameer, a director at Sri Tools. “Curtailing expenditure is a priority now. The night shifts at my factory have been stopped.” For now, he says, around 40 of the 350 workers have been given other roles, but if the situation doesn’t improve, then “layoffs are a certainty”. Like Sri Tools, most industrial units in Punjab fall under the Micro, Small, and Medium Enterprises (MSME) segment.

The World MSME Forum president, Badish Jindal, says that of the approximately 7.5 lakh crore worth of goods that India exports to the U.S., Punjab’s contribution is around ₹30,000 crore. “Garments account for ₹8,000 crore, fasteners for ₹2,000 crore, electrical machine tools for ₹5,000 crore, auto parts and hand tools for ₹4,000 crore, leather products for ₹500 crore, sports goods for ₹300 crore, and agriculture implements for ₹200 crore,” he says.

Jindal is worried about the broader impact. “If there are layoffs from the factories, it will percolate to the local services sector. From street vendors to transportation, everything will be affected. This could eventually create broader demographic shifts as populations dependent on jobs in Punjab will relocate.”

Market manoeuvres

In Punjab, the MSME sector has emerged as an engine for the State’s socio-economic growth, with nearly 3 lakh MSME units employing 11.58 lakh people in 2022-23, according to the State Economic Survey 2024-25. Most small-scale industry production was concentrated in Ludhiana, with an output valued at ₹31,815.40 crore.

The engineering sector is a major contributor to Punjab’s economy, and Sameer is worried that the State’s approximately ₹3,000 crore hand tools industry, for which the U.S. has been a key market, could face huge distress. “Tools like wrenches, pliers, cutters, and screwdrivers are in demand there. But now, the U.S. importers are asking us to bear the burden of the tariffs, which makes my business unviable. The orders from the European markets are also sluggish right now as the buyers are evaluating their options with other countries.”

However, business owners are adopting a wait-and-watch approach. “I am hoping that the ongoing crisis-like situation doesn’t continue for long and things are resolved soon, because the U.S. is a key market for India,” says Rajan Dawar, who manufactures and exports fastener products used in construction. He adds that the immediate impact is being seen in the speed of orders. “Earlier, we would get an order every week, but that has slowed down. Buyers in the U.S. are looking at other countries where they could get a better deal. For us, finding new customers and setting up a new supply chain is difficult,” he says. Dawar is focusing on the Indian market now, besides countries in Africa and Europe.

The ‘chain effect’ in the industry is visibly apparent. Ashwani Agarwal, who runs Dalpat Forge India and is involved in drop forgings of hand tools, says, “Through drop forging, we produce spanners and supply them to exporters. My unit was producing around 10 lakh spanners; now that stands at around 4 lakh. We used to work all seven days; now we work only five,” he says, as he hopes for an early resolution of the impending difficulties.

Gaurav Jain, a director at Sharu Industries that supplies steel bars, the raw material used in the hand tools and in the auto parts industries, is anticipating a ripple effect. “Right now, the production at my unit is at the routine level, because there’s domestic demand on account of the approaching festive season, but after that, the production could take a hit as manufacturers and exporters are reducing orders,” he says.

Industry and trade body asks

The Chamber of Industrial and Commercial Undertakings (CICU), a prominent industry and trade body in Punjab, is concerned. Its members met in August to deliberate on the issue. They have asked the Union government to take immediate steps to reduce logistics costs and provide export benefits of at least 15%.

“The government should extend stronger support to the manufacturing sector,” says CICU president Upkar Singh, who is involved in the auto components sector. He feels that the government needs to make the U.S. tariff issue a top priority, as once customers are lost, it is very difficult to regain them. “The government should launch a mini Production Linked Incentive (PLI) scheme. The PLI scheme is largely designed for large-scale industries, but it’s time that it should be extended to garments, hand tools, auto components, and other key export sectors, especially to small-scale industries,” he said.

Singh says the Centre’s recent measure of lowering the Goods and Services Tax (GST) will not only energise the domestic industry but also strengthen India’s position in the global market, particularly in dealing with tariff challenges from the U.S. and other countries.

Narinder Bhamra, president of the Fastener Manufacturers Association of India, says the business in the approximately ₹2,000-crore fasteners industry, which is involved in the manufacturing of nuts, bolts, studs, rivets, and screws, has reduced by half.

Textile troubles

The share of the textile industry out of the total output of all industries in Punjab is 23%, and it contributes about 38% of the total export from the State to countries outside India, according to Punjab’s export vision document 2021-2026.

Ludhiana is the largest manufacturing cluster for textiles in northern India, with thriving industries. “Around 80% of my exports were to the U.S. At my unit, we produced over four lakh pieces a month, including T-shirts and sweatshirts. That has now dropped to 80,000 pieces,” says Rishi Kapoor, owner of Kapoor Cotsyn Exports, which employs close to 800 people. “If the current situation continues, it is going to be difficult to hold on to every employee; it is not sustainable,” says Kapoor.

With orders for garments and fabrics from the U.S. dwindling, the effect can be seen down the supply line. Neeraj Modi, a senior management official at Vardhman Polytex Limited, points out that the stock of cotton yarn at his unit has shot up. “Exporters here have stopped buying raw material. We have a surplus owing to low sales volumes. In the spinning industry, an average stock inventory is maintained for 15 days, but with the demand for yarn falling, the stock with us has reached a level for 40 days,” says Modi.

Hope keeps industry afloat

Punjab’s economy is dominated by agriculture, and the higher tariffs could end up hurting the growers and exporters of aromatic, long-grain basmati rice. The districts of Amritsar, Tarn Taran, Gurdaspur, and Pathankot are among the biggest hubs of rice exports in the country.

“We export about 3 lakh metric tons (MT) of basmati rice to the U.S., worth ₹3,500 crore. The average basmati price is $1,000 per MT, and with the new tariffs, it will be somewhere around $1,500, higher than competitor countries,” says Amritsar-based Ashok Sethi, director of the Punjab Rice Millers and Exporters Association. He hopes the Indian and U.S. governments engage in dialogue and diplomacy for a solution.

Apprehensive over the U.S. move, S.C. Ralhan, president of the Federation of Indian Export Organisations (FIEO), the apex trade body for exporters, explains that approximately 55% of India’s U.S.-bound shipments (worth USD 47–48 billion) have been exposed to pricing disadvantages of 30–35%. This has rendered them uncompetitive in comparison to their competitors from China, Vietnam, Cambodia, the Philippines, and other Southeast and South Asian countries. FIFO members met Union Finance Minister Nirmala Sitharaman to apprise her of the challenges faced by Indian exporters due to the recent escalation of tariffs. “The Finance Minister reassured us that the government stands firmly behind Indian exporters and is committed to addressing all concerns of the exporting community,” he says. The GST Council’s “timely reforms will bolster the resilience of Indian trade during a period of global uncertainty”, Ralhan adds.

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