Geo-Economics and Strategic Foreign Policy
The concept of geo-economics was introduced by Edward Luttwak in 1990 and involves using economic strength to achieve strategic and foreign policy goals. This approach has been notably applied by US President Donald Trump, surprising many nations, including India, with a transactional stance in trade negotiations.
India's Trade Strategy and Tariffs
- India faces a potential 20-25% tariff, compared to lower percentages from other countries, such as the UK (10%), EU (15%), Indonesia (19%), and Vietnam (20%).
- India's decision may involve choosing higher tariffs over opening its agricultural markets, competing with a 5% disadvantage.
- Prime Minister's commitment to protect Indian farmers' interests is crucial in this context.
Manufacturing Sector and Economic Growth
The growth of the manufacturing sector is essential for employment, but despite the "Make in India" initiative, manufacturing's GDP contribution remains at 14%, below the 25% target for 2025. Unemployment among graduates surpasses that of non-graduates, indicating a pressing need for sectoral improvement.
Comparisons with China and Tariff Adjustments
- China's success lies in subjecting companies to competition, unlike the protected Indian manufacturing sector.
- India could benefit from accepting agricultural imports from the US if it leads to manufacturing sector tariff concessions.
Challenges in Agricultural Imports and Trade Deals
While allowing agricultural imports poses challenges, such as concerns with GM crops and the vulnerability of the dairy sector to predatory pricing by US firms, strategic concessions could be advantageous.
Trade Agreements and Global Standards
- India's trade deal with the UK allows duty-free agricultural imports, but internal regulatory issues could create non-tariff barriers.
- The issue of subsidies provided by the US and EU to their farmers compared to Indian farmers remains a persistent challenge.
Future Trade Negotiations and Opportunities
The evolving global economic landscape presents opportunities for India to adapt its policies and structures, gearing up for potential demographic challenges in developed countries and the rising costs of agricultural produce.
