Donald Trump's tariff madness may have a pattern or not. But it has definitely given some advantages to India.
Since 2015, Prime Minister Narendra Modi has desired that India should become a manufacturing alternative to China.
'Make in India' made waves but still New Delhi required miles to travel. But thanks to Trump, now it looks as if New Delhi has 'gained' an advantage.
As if this needed further calibrated methodologies and hence Trump's decision to enhance tariff with China to a staggeringly high 145%. Moreover, India and a few other countries got a 90-day reprieve.
The sky-high tax on Chinese imports to America presented a significant opportunity for India’s trade and industry, said Praveen Khandelwal, BJP MP. But to consolidate the gain itself is no cakewalk.
Manufacturing and the jobs it can bring are thought to be crucial to India’s rise as a global power. Manufacturing for China accounts for a 25% share of most East Asian economies. India's is about 12 per cent only.
China, with an economy five times the size of India’s, is the biggest of the Asian countries to have sped toward prosperity by making and selling stuff the rest of the world wants to buy.
Now it is argued that US President Trump’s return to the White House and subsequent announcement of higher tariffs have created challenges for export flows in key Indian sectors.
India must therefore pursue reciprocal tariff reductions through bilateral negotiation while also embracing the need for diversification of export markets.
US immigration policy may challenge India’s IT and outsourcing sectors, requiring diversification of these activities.
New Delhi can thus take advantage of platforms like the Indo-Pacific Economic Framework for Prosperity to engage new partners to weather the challenges that this new tumultuous era may bring.
India’s strength lies in focusing on the relationship between Indian Prime Minister Narendra Modi and President Trump to negotiate bilaterally for reciprocal tariff reductions. India’s statement welcoming US energy imports following President Trump’s move to increase domestic oil and gas production is an example of this strategy.
India will stand to gain from the Indo-Pacific Economic Framework for Prosperity (IPEF) regardless of US engagement. Based on our applied general equilibrium model, deeper trade liberalisation in the IPEF region increases the region’s growth rate from 3.7 to 4.2 per cent without US involvement.
With growing interest in minilateralism, IPEF members will seek to strategically collaborate on shared supply chain and other interests, regardless of US involvement, says an article in 'eastasiaforum.org'.
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But there are other issues.
This reference may be helpful the gravity of the challenges.
Take companies which manufacture Lithium-ion batteries for vehicles.
Here access to technology was the most frustrating obstacle.
These factories will be depending a lot on imports, which need to be bought in bulk and take time to ship.
Of course, the over all infrastructures scenario has changed a lot under Moditva phenomenon since 2014.
But experts say India would still need time to "train" the workforce to match businesses’ requirements vis-a-vis expertise and technology at an affordable price.
Someone will also have to connect people 'pockets' of economic strength at a larger scale or mass levels.
There are a few other issues and some of them have been part(s) of India story for decades.
There are matters such as high cost of land, absence of good finance from banks and a shortage of the right kinds of engineers.
There is red tape and there are issues of inconsistency in policy matters between one state and other and also between the union (federal ) Govt in New Delhi and different provinces.
Some factories those sew 'car-seat covers' for the Indian market have to get high-precision fabric cutters, robotic arms etc from Europe -- Germany and Italy.
The synthetic fiber also has to be imported.
So, as they say 'Expensive raw materials' are only the tip of the iceberg.
ends
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