US Tariffs Provide Potential Growth Opportunities for India, Says Niti Aayog
Niti Aayog officials indicate that U.S. reciprocal tariffs may benefit India rather than harm it, creating opportunities across sectors. With a favorable positioning compared to other affected countries, India is encouraged to explore trade agreements with major manufacturing nations. The recent quarterly trade report shows promising growth in India’s trade and highlights the importance of the textile sector, despite its modest global market share.
Niti Aayog’s Program Director, Pravakar Sahoo, stated that the reciprocal tariffs proposed by U.S. President Donald Trump are unlikely to negatively impact India. Rather, these tariffs may generate opportunities across various sectors for India, contrasting with the situation for Mexico, Canada, and China, which face significantly higher tariffs. Sahoo explained, “Except for a few sectors, most sectors will benefit from these proposals. It is a very dynamic scenario, but overall, I do not see a major impact on India.”
During an event following the release of Niti Aayog’s quarterly trade report, member Arvind Virmani emphasized the potential for India to diversify its supply chains, especially given the current concentration of manufactured exports in China. He stated, “If we compare our position… post-imposition of these tariffs on our competitors in the U.S. market, we are much better off.” A more comprehensive analysis of the reciprocal tariff plan’s effects on India is expected in the next report edition.
The U.S. has recently implemented significant import duties, including a 25% tax on steel and aluminum products and a similar rate on completely built vehicles and auto parts. India is among the five countries that benefited from a decrease in China’s share of U.S. imports post-2018 tariffs. In light of these developments, there is an ongoing discussion about the benefits of Free Trade Agreements (FTAs) and Bilateral Trade Agreements (BTAs) to promote competitive supply chains through low or zero tariffs.
Sahoo suggested that India should pursue trade agreements with nations that possess substantial manufacturing capabilities and are sources of foreign direct investment (FDI), such as the U.S., EU, Japan, the UK, and South Korea. Additionally, the Trade Watch Quarterly report highlights the importance of India’s textile sector, which although significant, only represents a modest 4% of global trade.
India’s total trade witnessed a growth of 5.67% in the first half of 2024 versus 2023, with exports rising by 5.23% and imports increasing by 6.07%. Stability was observed in the export composition, with copper now among the top ten imports due to escalating infrastructure demands. The leading markets for Indian exports remain the USA, UAE, and Netherlands, which together constitute 33% of total exports, with growth in the Netherlands propelled by smartphones and petroleum products.
The imposition of reciprocal tariffs by the United States presents India with a unique opportunity to enhance its market position. While countries such as China and Canada may face challenges under these tariffs, India can potentially capitalize on these developments. Pursuing strategic trade agreements and focusing on strengthening competitive supply chains could significantly benefit India’s export capabilities. Furthermore, the textile sector and the overall trade growth reflect India’s resilient market presence amid evolving global trade dynamics.
Original Source: www.financialexpress.com
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