Donald Trump's higher Tariffs disrupt millions of livelihoods across India'sexport-driven industries such as textiles.
But PM Narendra Modi wants to fight it back. India is backing him.
Donald Trump wants tariffs free access for American goods for exports. He got with many countries - Japan, South Korea and EU - and hence he wants it from India as well.
Brazil is also resisting.
Modi is hardly a person to give in to such red-eye arm-twisting. The Modi Govt wants a deal that is "mutually beneficial and hence balanced".
At 50%, the tariffs on India are akin to a sanction on trade between the world's biggest and fastest growing economies.
This scenario was 'unthinkable' even just a few months ago.
The challenges are numerous for India. It is the fourth largest economy and it is faced with a challenge was not calculated by anyone by March 2025 -- when the last fiscal ended.
Now, even as the Modi Govt rushes through with long-delayed economic reforms, India's growth prospects have slowed significantly from the 8% levels seen a few years ago, and its external crisis shows no sign of ebbing.
The war of words between Delhi and Washington, especially over the former's energy purchases from Russia, have only intensified and trade negotiations which were set to begin earlier this week, have been called off.
Modi's tax handouts could also increase the probability of a further interest rate reduction by India's central bank, which has already slashed rates by 1% in the past few months - something that is likely to spur more lending, according to analysts.
This, along with a boost in the salaries of nearly five million government employees and 6.8 million pensioners that kicks in early next year, will help India's economy retain its growth momentum, they say.
India's stock markets have cheered these announcements. And despite the panic caused by trade uncertainties, earlier this month, India also got a rare sovereign rating upgrade from S&P Global, after a gap of 18 years. A sovereign rating measures how risky it is to lend to a government or invest in a country.
This is significant because it could lower the government's borrowing costs and improve foreign investment flows into the country.
India is keen to defy Trump and Narendra Modi would be working hard to improve ties further with Vladimir Putin's Russia and re-work certain things (a lot) with Xi Jinping's China. But in strictest economic and data matters - realities ought to be understood well. Take the figures - India's export to the US in 2024 was about $ 87 billion.
Do we understand how much it is in comparison with Russia and China's imports from India. It is more than 'four times' the combined figure of both China and Russia put together. In addition - there was a surplus of &44 billion in favour India.
Post-Aug 27th as the new tariffs rates kick in; this will be a mega challenge to handle now for Prime Minister Narendra Modi and his government.
In 2024, Russia imported goods worth $5 billion and China $15 billion. There were surpluses of $60 billion and $100 billion. Hence, how much drastic change can really come in?
Almost all of India's $86.5bn in annual goods exports to the US perhaps stand to become 'commercially unviable' if these higher rates continue for long.
There are other problems - but vital ones. China is unpredictable. Everytime there were difficult times, Beijing played their unfriendly games. The Galwan skirmishes could have been avoided during the peak of Covid19.
Secondly, come what may Russia is in war. And its own economy is in doldrums. In diplomacy too; there are difficult and complex issues on the table. China has its well known 'friendship' and 'pampering' approaches towards Pakistan. Lately, China was favouring Bangladesh coming into the SCO format. It's true our good SAARC is now defunct because we wanted to 'isolate' Pakistan.
But Pakistan also is in SCO format and over the last few years Beijing has broadened the SCO table almost bringing entire South Asian subcontinent into it.
Sri Lanka, Nepal and Myanmar are also in the SCO family. Afghanistan is an observer and even the Maldives there in. So there would be chances -- China will have more friends and India's position on many issues may not have many takers. Nevertheless India is expecting a strong statement from this year's SCO Summit in Tianjin.
Facts and Figures -- bring in Fear :::
How?
The tariffs would be similar to "a trade embargo, and will lead to a sudden stop in affected export products," Japanese brokerage firm Nomura has cautioned.
The US is India's top export market, making up 18% of exports and 2.2% of GDP.
A 25% tariff could cut GDP by 0.2–0.4%, risking growth slipping below 6% this year.
Many Indian exporters have said they can barely absorb a 10-15% rise, so a combined 50% tariff is far beyond their capacity.
India's former RBI Governor Urjit Patel said that India's "worst fears" have materialised with the US announcements.
"One hopes that this is short term, and that talks around a trade deal slated to make progress will go ahead..... Otherwise, a needless trade war, whose contours are difficult to gauge at this early juncture, will likely ensue," Patel wrote in a LinkedIn post.
ends
No comments:
Post a Comment