India’s Trade Prospects Amid US Tariff Changes: Insights from NITI Aayog
NITI Aayog indicates that new US tariffs could benefit India by creating market opportunities as tariffs are imposed on major players like China, Mexico, and Canada. The agency also highlights India’s low participation in critical global trade sectors and persistent issues within its textile industry, suggesting that overcoming these hurdles is vital for future growth.
NITI Aayog has indicated that the forthcoming implementation of reciprocal tariffs by the United States, effective on April 2, may present significant opportunities for India. The US plans to impose additional tariffs of 20–25 percent on imports from countries such as China, Mexico, and Canada, which are major competitors in the American market. Notably, these countries contribute to approximately 50 percent of the US’s overall imports, totaling over $3 trillion.
Pravakar Sahoo, Programme Director at NITI Aayog, emphasized that while certain sectors might experience adverse effects from these tariffs, their analysis reveals potential opportunities for India to increase market share. “We are looking at the data at a disaggregated level… these are preliminary results… reciprocal tariffs are not going to affect except very specific sectors and in fact, there are opportunities to really capture,” he noted.
Since assuming office, President Trump has promoted protectionist policies in an effort to prioritize American industries. In line with this, the US has already enforced a 25 percent tariff on steel and aluminium imports and plans to implement similar tariffs on fully assembled automobiles beginning April 3. Although President Trump has previously stated India’s high tariff structure will limit preferential treatment, he recently suggested that some countries might receive concessions beginning April 2.
The second edition of NITI Aayog’s Trade Watch Quarterly report also provided insights into India’s role in global trade from July to September of the current financial year. The report revealed that India’s trade is significant predominantly in sectors with low global demand. Notably, the EU, Northeast Asia, North America, and ASEAN collectively account for 77 percent of global trade, while India’s trade with these regions represents only 8 percent, fulfilling a mere 6 percent of their import requirements.
India’s exports in key commodities, such as electrical machinery and nuclear reactors, are overshadowed by those from competitors like China and the US. Despite having a considerable 44 percent trade share with regions such as South Asia and East Africa, these areas together constitute only 2 percent of global trade. Competing nations like Russia and the UAE dominate key export areas like mineral fuels, where India faces challenges.
Particularly concerning is the textile sector, which has stagnated at approximately $40 billion in exports over the past six years, growing by only 0.8 percent per annum, contrasting sharply with the global growth rate of 3.5 percent. The report highlights structural inefficiencies within the textile industry, including fragmented industrial clusters, low compliance with international standards, and cumbersome export processes, which hinder competitiveness despite India’s potential in this critical sector.
In summary, NITI Aayog’s assessment suggests that anticipated US tariffs may create advantageous conditions for Indian exports. While certain sectors could be negatively impacted, the overall outlook remains optimistic due to new market opportunities. However, India’s trade performance highlights several challenges, especially in sectors like textiles where growth has lagged significantly. Addressing structural inefficiencies will be essential for enhancing India’s competitive edge in global trade.
Original Source: www.business-standard.com
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