The Impact of US Tariffs on India’s Billionaires and Trade Policies
India’s billionaire elite face challenges as Prime Minister Modi alters trade policies in light of US tariff pressures and domestic economic concerns. This marks a potential shift from a protectionist approach modelled over the decade, prompting calls from the government for companies to embrace competition and adapt to changing international demands.
India’s billionaires are now feeling the repercussions of increased trade tensions, particularly those stemming from US tariffs. Prime Minister Narendra Modi has not publicly addressed accusations from the opposition Congress Party regarding potential favoritism towards American interests. Following recent discussions regarding reduced import duties for Tesla, it is evident that India is reconsidering its trade policies and that economic protectionism may no longer be guaranteed for its elite business leaders.
Over the past decade, Prime Minister Modi’s administration has relied heavily on a select group of domestic oligarchs, employing a strategy of high tariffs and favorable contracts to shield them from foreign competition. Tariffs, which had previously fallen to approximately 7% in 2011, were increased to 12% by 2022, positioning India among the highest tariff regimes worldwide. This approach has been evident in international trade negotiations, where influential businessmen’s interests are often correlated with government policy, as noted by Robert Lighthizer, the former US Trade Representative.
Research indicates that the influence of multimillionaire magnates such as Mukesh Ambani, Gautam Adani, and the Tata Group has grown significantly, with the assets of the top five conglomerates expanding from 10% of nonfinancial assets in 1991 to 18% by 2021. As Viral Acharya, a former central bank deputy governor, points out, these conglomerates have flourished under protectionist policies, allowing them to dominate various domestic sectors without strong international competition.
Under the current US administration, however, the prospects for India’s wealthy elite appear increasingly precarious. The Modi government is reportedly instructing domestic industries to adopt a more competitive and less protectionist approach. This shift comes amid criticisms of India’s high tariffs, notably a 39% levy on agricultural products, which remains significantly higher than that of the United States. Modi’s sensitivity towards local farmers complicates potential concessions in agricultural trade, as it could alienate a vast segment of the Indian workforce reliant on farming.
Large corporations may also face challenges as India is urged to substitute Chinese materials with American alternatives—an endeavor fraught with high costs. Resistance is anticipated if the Modi administration aggressively pursues this strategy, leading to possible tensions regarding India’s increasing alignment with Western interests against its neighboring powers. Redressing regional ties—such as addressing BYD Co.’s application to set up electric vehicle production—could provide valuable opportunities.
In summary, India’s billionaires are confronted with a shifting trade landscape as Prime Minister Modi adjusts policies in response to US trade demands. The era of robust tariffs and protectionist measures benefiting elite businesses may be waning. As the government seeks a balance between international relations and domestic pressure, the future remains uncertain for India’s economic powerhouses amid rising trade tensions and financial instability.
Original Source: m.economictimes.com
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