Come April 2 and the imposition of the reciprocal tariff regime by the United States on nations around the world including ours, there is bound to be tremendous economic uncertainty facing the Indian nation. Though India is not as economically integrated with the US as the other major economies of the world like China, the EU, Canada, and Mexico, there are bound to be serious ramifications of this upending of international trade conventions on it as well.
India has two options before it. It can choose to ride it out by letting the reciprocal tariffs roll and play themselves out, or it can take a hard look at whether its policy of inordinately high tariffs on imported goods is actually doing its economy more harm than good. While India is definitely better positioned than most other major countries to stare the bully in the face and not back down on tariffs, the question that it needs to ask is if doing so actually suits the interests of the Indian economy and its people.
High tariffs on imported goods make local industry complacent and lazy, in the process harming the interests of the consumers - the common people of India. There is no incentive on the part of local industry to compete with the best in the world in terms of quality, features, and price. This, in turn, stifles innovativeness and the development of new age products that offer the consumers the best value for their money. Remember the kind of cars India used to have in the old license-raj era of high import duties on practically every product under the sun.
Once the license raj was dismantled, the old Ambassadors and Premier Padminis with their sputtering engines and vintage bodies became relics of the past, which had no place on Indian roads. As a matter of fact, a veritable automobile revolution swept the land with the vast middle class section of the population, which barely managed to buy a scooter, thought nothing of buying the leading car brands of the world.
India today stands on the threshold of becoming a major global power and a developed country, but for that, it needs to expose its economy to more comprehensive trade with major economies like the U.S., the U.K., and the European Union. We could sign separate trade deals with all of them to facilitate and expedite the process if needed, but it cannot be business as usual. The latter approach will find India always lagging behind and failing to realize its full potential.
Reducing tariffs will help Indian companies become more competitive globally as they will be required to enhance quality and improve efficiency in order to survive in the new dispensation. This will grow India’s exports in a major way. The Indian consumers, on the other hand, will have access to much better quality goods at more reasonable prices.
India’s current share of global exports is a mere 1.8%[[1]]
This is dismal for a country seeking to become a global economic superpower in the near future. Dismantling the high tariff regime might be the big bang reform that India needs to kickstart and rev up its economy for exponential growth.
[1]https://economictimes.indiatimes.com/news/economy/foreign-trade/indias-share-in-global-trade-doubled-since-2005-comparatively-moderated-in-last-10-years-report/articleshow/116676603.cms?from=mdr
Feature Photo by Markus Winkler: https://www.pexels.com/photo/usa-tariffs-concept-with-scrabble-tiles-30855417/
