NEW DELHI – U.S. President Donald Trump’s doubling of tariffs to as much as 50% on goods from India took effect as scheduled on Wednesday, escalating tension between the world’s two largest democracies and strategic partners.
COMMENTARY:
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK:
“Even as India’s exports to the United States amount to a modest 2.3% of GDP, the sectoral impact of the second 25% tariff kicking in on Wednesday will be asymmetrical.
“Signs of downside risks to growth will also draw in the central bank’s hand, alongside potential relief on the credit and liquidity fronts.
“Meanwhile, other counterefforts, including seeking alternate markets, strengthening trade and investment ties through multilateral as well as bilateral trade deals, will be important.
“Subject to other geopolitical developments, the door for negotiations might reopen later in the year.”
RAJESWARI SENGUPTA, ASSOCIATE PROFESSOR, INDIRA GANDHI INSTITUTE OF DEVELOPMENT RESEARCH:
“The government should adopt a more trade-oriented, less protectionist strategy to boost demand, which is already slacking.
“Doing free trade agreements with multiple countries, doing regional agreements, lowering tariffs and non-trade barriers could be one way to support trade and encourage foreign direct investment.”
AASTHA GUDWANI, INDIA CHIEF ECONOMIST, BARCLAYS:
“We estimate 70% ($55 billion) of India’s exports to the United States are now under serious threat, accelerating downside risks to growth.
“From a ‘good friend’ to a ‘bad trading partner’, it has come a long way.”
SUJAN HAJRA, CHIEF ECONOMIST AND EXECUTIVE DIRECTOR, ANAND RATHI GROUP:
“Washington’s 50% tariff is a jolt, but hardly a knockout. India’s trade deficit may widen by about 0.5% of GDP, growth could dip by half a percentage point and the rupee may weaken modestly.
“Up to 2 million jobs are at risk in the near term. Yet the bigger picture is less gloomy: India’s export base is diversified, its corporate earnings and inflation outlook remain intact, and domestic demand is robust enough to cushion the blow.”
AAKANKSHA SHRAWAN, ASSISTANT PROFESSOR, NATIONAL INSTITUTE OF PUBLIC FINANCE AND POLICY:
“The government should widen its horizons and position itself well, such that it can capitalise on the most overlooked component of India’s trade flows: services.
“There is, therefore, an urgent need to have a relook at the government initiatives (Service Export from India Scheme, Software Technology Park Scheme, Digital India Internship Scheme) and governing bodies (Service Export Promotion Council and MeITY) that aim to promote India’s service exports.” — Reuters
