When US President Donald Trump announced two -digit prices on countries around the world, which he nicknamed a “liberation day” for US trade, he allowed the world markets. While Trump has since announced a “break” on the prices, the final resolution of the tariff threat will depend on the “tailor -made” negotiations between the White House and each targeted country.
India had to deal with a tariff rate of 26% under the initial announcement, which has now been reduced to 10% in the middle of the 90 -day break. India needs innovative solutions to transform this into an opportunity rather than sticking to the usual bureaucratic negotiation methods, which could lead to a severe setback to its growth trajectory. Any potential reprisals is out of the question because the United States has the domination of climbing due to its GDP and the consumer market 10 times higher. Instead, India should abandon all non -agricultural prices on US imports to zero.
There are several advantages of such an approach. First, there would be little change in the import bill for India due to the high costs of American manufactured products; Even without prices, they will remain non -competitive. However, the drop in prices would help exports and manufacture of India, even if the United States ends up the threat of “release day” because the main economists have a long time believed A reduction In price is necessary to stimulate exports. Finally, such an offer to Trump could save India from a potential economic slowdown given the size of Trump prices – even the rate of 10% reduced – and safeguards future growth and the employment trajectory of India, which is very dependent on the United States. This is an offer Vietnam and Cambodia have already done Donald Trump, and he is look at it positively And ready to conclude offers.
India trade surplus in goods with the United States, $ 45.7 billion In 2024, may not be as important as Vietnam (123 billion dollars), but it is just as crucial for India’s employment production, price stability, stock market and the value of its currency. Alarming, what is at stake is even more crucial than the trade in goods: India Export of serviceswho sees a Exceptional push (maybe exceed $ 400 billion this year) and will be the country’s key future growth and employment. If Trump’s attention was to turn here, he could slam the door on this development path. Indian software companies such as infosys, TCS, Wipro, etc. work on exports to the United States and their weight in India inflated stock market And the feeling that ensures it is critical.
Just as crucial are the Global capacity centers that US companies Like Google, Microsoft, JP Morgan, Goldman Sachs, Citi, etc. developed in India. GCCs alone employ around 2 million people. Directly and through the multiplier effect, these CCGs as well as software companies are massive work Generators for young people from India who have few other good options. Any drop in these opportunities would considerably increase the leak of the already massive brains of India.
The Indians have celebrated that pharmaceutical products have been excluded from the latter prices announced by the United States, and since almost half of the generic drugs sold in the United States come from India, this is presented as a great gain. However, Trump just announced that pharmaceutical products will be targeted during the next series of pricing increase to come very soon, which will not be subject to the break of 90 days on the general rates. If India is now acting to conclude an agreement, it could be able to cut an exception for its pharmaceutical industry.
India’s prices on American oil and gas are already low, and it could considerably increase its purchases there to obtain a more balanced business. But even on manufactured products, the costs of lowering Indian prices on American imports to zero are practically negligible. Consider the automotive industry as an example. Even the cheapest American cars of Chevrolet and Ford are at the price of $ 23,000 on the American market, and the average price of an automobile is $ 49,000. But the average car tax is 5% in the United States (and it is 0 in certain American states), while in India TVA plus the tax on the road, etc. Total of 43%. This means that the road price for an American car bought in India – even without prices – would be at least $ 32,000, and it is without transportation from the United States to India.
Once all of this are added to Indian rupees, the cheapest American cars would cost in a range of 3 million rupees. An equivalent Indian car does not cost more than 1 to 1.5 million rupees. The same calculations for the average American car would result in a price on the road of 4.5 million rupees while the average price of an Indian car is 1.15 million Rupes. Thus, the Indian consumer simply does not have the capacity to buy American manufactured cars, regardless of the rate rate. This is true in the range of manufactured products, so there is little costs to drop the zero prices on American manufactured products. If fear is a flood of imports that stimulate Indian counterparts in bankruptcy, this will simply not happen with American manufacturers.
At the same time, it is the consensus of Indian economists through the spectrum – of Arvind Panagariya And Arvind Subramanium has Raghuram Rajan And Montek Singh Ahluwalia – that India, which has increased its prices since 2014, should rather start to delete them so that the entry costs in manufactured exports can drop. This is added to the fact that some competitors would improve the quality of India products and serve to improve exports from the country. This does not even include the argument for the well -being of consumers – an important point, because India has since independence has always given a short reduction to its national consumers.
India has difficult experience to get to make its decision. When the clothing industry has moved to synthetic threads in the era of globalization and rapid fashion, India has imposed prices on the synthetic wire In order to promote a very rich industrialist. The result was that India lost its Competitiveness in textile exports – and the use of mass associated the sector provided once. India must avoid repeating this error.
It is only in agriculture that India must keep certain prices to protect its farmers, given their poverty and the subsidies that American farmers receive. But even here, a rationalization is in order. India agricultural priceswhich on average 113% and can increase more than 300%, could be considerably reduced without affecting its small and medium farmers.
Overall, faced with Trump’s propensity for prices, India could find itself very bad without thinking out of the box. However, reflection and boldly play could transform this crisis into an opportunity and an excuse to do what India should have done a long time ago.