Tariffs as a Strategic Weapon

The use of tariffs as a strategic weapon by the United States has raised concerns globally. Unlike traditional protectionist measures or sanctions targeting unfriendly regimes, these tariffs aim to dictate international trade dynamics and impinge on national sovereignty. This approach has created uncertainty in international trade, adversely affecting world trade, investment, and economic growth.

Impact on India

• The 50% tariff imposed by the US is expected to negatively impact India's exports, particularly in textiles, leather & footwear, gems & jewelry, chemicals, and electrical machinery.
• Consequences include reduced growth, employment, trade balance, and macroeconomic stability, alongside long-term investment disruptions.
• The US has also levied an additional 25% tariff, penalizing India for its trade with Russia and perceived lack of support in global diplomatic stances.

India's Response Strategy

• India must avoid increased protectionism under the guise of "Atmanirbhar Bharat" and instead focus on economic openness and bilateral agreements.
• Exports have historically been crucial for high growth, as seen in the post-1991 economic reforms leading to increased global export shares.

Protectionism Trends

• Since 2017, there has been an inward shift with rising protectionism, indicated by an increase in average tariffs and tariff lines above 15%.

Importance of Liberalization

• Liberalizing trade and investment is key to accelerating growth, attracting foreign direct investment, and fostering technological advancement.
• The production-linked incentive scheme needs reassessment to enhance value addition through production, technology, and innovation.

Agriculture and Dairy Sector Challenges

• Excessive protectionism in agriculture and dairying remains a hurdle in bilateral trade negotiations.
• To improve agricultural productivity, India must embrace innovation, GM crops, and balanced fertilization, overcoming cultural hesitancies.

Call for a Second Green Revolution

• The stagnant agricultural sector, contributing only 14% to the gross value added, requires a productivity boost through modernization.
• Overcoming political obstacles is crucial for a time-bound action plan to enhance agricultural productivity and improve farmers' fortunes.