Reciprocal Tariffs and India's Economic Strategy
The US is set to implement reciprocal tariffs, and this has been highlighted by Donald Trump as a potential shift in India’s trade policies. For India, and Prime Minister Narendra Modi, this situation can be seen as an opportunity to initiate industrial reforms.
Tariff Discrepancy
- India’s average MFN applied tariff rate: 17%
- America’s average tariff rate: 3.3%
- India could benefit by reducing tariffs on non-agricultural US products to America's average rate.
Economic Benefits of Reducing Tariffs
- Enhancing industrial efficiency by lowering input costs.
- Providing domestic firms with better technology and materials access.
- Encouraging innovation and productivity among Indian companies.
- Reducing costs for Indian producers under the 'Make in India' initiative.
- Attracting global investments and integrating into international value chains.
Improved India-US Trade Relations
- Current bilateral goods trade: $118.3 billion in 2023-24.
- Target: $500 billion by 2030.
- Strategies to achieve this include eliminating high tariffs and addressing non-tariff barriers.
- Improving access to the US market for Indian exporters.
Geopolitical Implications
- The India-US partnership is crucial for the Indo-Pacific strategy and stabilizing global supply chains.
- Reducing tariffs could provide a strategic advantage over relying on China-centric supply chains.
- Aligns India's economic growth with its foreign policy objectives.
Negotiating from a Position of Strength
- India has granted zero-tariff access in FTAs with several countries and regions.
- If the US still imposes tariffs, the issue may lie with non-tariff barriers and intellectual property rights.
- A tariff-free arrangement would solidify India’s role as a key player in global trade.
By acting decisively, India can transform potential challenges into strategic opportunities for long-term economic leadership.