As the US tariff roils markets and a wary world looks at the China-India scenario, an expert concedes this is a tricky present but sees a bright future
Indian PM Narendra Modi with Chinese President Xi Jinping during a meeting, in Tianjin, China. PIC/PTI
While the noise about the tariffs has risen to a crescendo, understandably now that the 50 per cent tariffs have hit, we must remember that there were rumblings in his first term as well about imposing tariffs on countries President Donald Trump thought were ‘ripping off’ the United States (US). So our government knew something was on and was preparing since then. We accelerated negotiations with a number of countries, resulting in significant Free Trade Agreements (FTAs). This shows that though they had not reached the decibel level as they have now, Trump’s early tariff announcements were signals that the government responded to, and a strategy was already being formed then.
Only us
Understandably, there is anger about why India is being singled out for buying oil from Russia. Well, we can put it this way: Trump has ‘issues’ with certain countries. Simply put: this is geopolitics. While outwardly, this seems like piling pressure on India to stop buying oil, I am quite certain that there are some kinds of back-channel negotiations. These talks may be about other pressure being put on India, one which we do not know about. Otherwise it is difficult to see why India has been targeted specifically. The European Union and the US buy Russian goods.
Firm stand
It is for this reason precisely that I am so proud of India’s stand. We should stay firm. In fact, we can also look to apply some leverage to the US with regard to other exports. Having said that, diversification is now key. We have also heard the Finance Minister Nirmala Sitharaman expressing government support for Micro, Small and Medium Enterprises (MSMEs). The reforms proposed for the Goods and Services Tax (GST) are part of the support bouquet.
Rhetoric
While number crunching is one thing, there is also a psychological aspect to this with statements like, ‘This is Modi’s war’ (referring to Russia-Ukraine) and ‘dead economy’ or ‘crush the economy’. These are in your face now because the internet has made this accessible. Yet, there has been pressure on India for years, specifically in the 1960s and 1990s. This, though, is not the India of the 1960s.
On the students’ side, the talk about Trump welcoming six lakh Chinese students to the US is a figure he has got out of thin air. All this is rhetoric, and we need not react to this at all, just like there has been no official reaction to Trump's statements by the government.
Brain gain
One does understand and has empathy with the uncertainty Indian students are going through right now. Since I am looking at this through an optimistic lens and acknowledging that we have had good relations with the US so far, when it comes to certain partnerships like defence, for instance, the pressure on students may result in brain gain for India, not brain drain. These youngsters may return home because of these policies, resulting in a gain for us. If things continue in this vein, we may see the US dollar getting affected in the long run, not right now, but later; financially, American consumers may feel the pinch. When that time comes, even the US leadership may find it hard to sidestep the impact and concede ground on tariffs.
The columnist is the Deputy Director General, IMC Chamber of Commerce and Industry
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