October 5, 2025

The US government faced a big crisis at midnight on September 30–October 1, as lawmakers failed to agree on funding, leading to a government shutdown. This isn’t just a problem in Washington — it’s a storm affecting the whole world, especially India! Why? Because America’s economy is huge and deeply linked to India’s business and money. The shutdown began because Republicans wanted a simple funding plan with no changes, while Democrats insisted on adding healthcare money. Both sides stood firm, blocking a deal. This freeze paused services and furloughed about 800,000 US federal workers — a massive hit for the $27 trillion US economy. Far in India, leaders and market experts watch nervously. India relies heavily on American markets. In 2024-25, India attracted $50 billion in foreign investment, mostly from the US. But recent US tariffs — super high taxes of up to 50% on steel, pharma, textiles, and more — have already hurt Indian exporters. The startup ecosystem depending on US venture capital is also feeling the heat. Indian exports are under heavy pressure: engineering goods, textiles, gems, and jewellery sold in the US are taking a hit. The tariffs and shutdown mean fewer orders and delayed payments. The rupee slipped to a record low of 88.8 against the dollar, and investors pulled out $2.7 billion from Indian stocks in just September. The Reserve Bank of India (RBI) is stepping up, planning to inject money and intervene in currency markets to steady the rupee. The Sensex cheered a bit on October 1, jumping over 600 points thanks to RBI’s call to keep interest rates steady at 5.5%. But experts warn, if the shutdown lasts long, the trouble will only grow bigger. History shows government shutdowns have hurt US growth before — with Trump’s 35-day shutdown in 2018-19 cutting output by $11 billion. Every day of shutdown could shave off nearly 0.2% of US growth. And since the US is India’s biggest export partner, even a small slowdown there can cost India billions in trade. If the shutdown stretches beyond a few weeks, Indian exporters might see massive order cancellations, and foreign investors might pull out more money. The rupee could sink further, and borrowing costs for India might climb. The government and RBI will face tough choices between saving the rupee and controlling inflation. In short, this US shutdown mixed with steep tariffs is a double blow to India’s economy — shaking markets, exports, and investor faith. But there’s hope: if Washington finds quick agreement, India’s markets could bounce back. If not, India’s resilience will be truly tested in this tough global game. As Yashwardhan Singh of India Today puts it, “in an interdependent world, even lawmakers’ fights thousands of miles away can ripple across India’s economy.”

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Tags: Us government shutdown, India exports, Tariffs, Rupee, Foreign investment, Financial markets,