Loading Now

India’s Trade Strategy: Navigating US Tariffs Through FTAs and Export Diversification

India is poised to benefit from recent US tariffs on aluminium and steel, with a modest trade deficit in these sectors. The country is diversifying its export base and leveraging alternative trade routes to improve its standing in global supply chains. India’s commitment to forging Free Trade Agreements (FTAs) aims to bolster export-oriented manufacturing, particularly as the digital economy expands.

India should not be overly concerned regarding potential reciprocal tariffs imposed by the United States, as asserted by the State Bank of India (SBI). Recent tariffs on aluminium and steel by the US are expected to yield certain benefits for India, which maintains a modest trade deficit in these sectors, quantified at $13 million for aluminium and $406 million for steel. Although India’s share of US steel imports is only 1%, it ranks among the top ten aluminium suppliers despite a slight decrease from 3% to 2.8% between 2018 and 2024.

In response to shifting trade dynamics, India has been actively expanding its export base, enhancing value addition, and exploring new markets. By leveraging alternative trade routes from Europe to the US through the Middle East, India aims to fortify its position within global supply chains. SBI noted, “India has been talking about free trade agreements with several partners – both bilateral and regional – in a bid to boost export-oriented domestic manufacturing.”

Over the past five years, India has successfully entered into 13 Free Trade Agreements (FTAs), including deals with Mauritius, the UAE, and Australia. Additionally, negotiations with the UK, Canada, and the European Union are underway, which encompass sectors such as digital trade, services, and sustainable development. Notably, the FTA with the UK is projected to augment bilateral trade by $15 billion by 2030.

As the digital economy continues to flourish, analysts indicate that digital trade agreements could potentially add an extra $1 trillion to India’s GDP by 2025. Furthermore, shifts in regional supply chains, alongside geopolitical circumstances like the US-China trade conflict, are crucial factors influencing India’s trade strategies.

With ongoing trade negotiations and an evolving global economic landscape, India’s strong emphasis on FTAs, digital trade, and export diversification is likely to enable the country to surmount challenges and enhance its position in global trade.

In summary, India’s proactive engagement in free trade agreements and strategic diversification of export markets serves as a robust response to looming tariffs from the United States. With expected advantages from recent US tariffs on aluminium and steel, India is poised to strengthen its global trade position. Initiatives focusing on digital trade agreements further bolster opportunities for economic enhancement, potentially yielding significant GDP contributions.

Original Source: m.economictimes.com

Post Comment