Former RBI deputy governor Viral Acharya suggests that US tariffs on Indian goods could benefit India by prompting lower trade barriers and spurring competition. The tariffs may lead Indian firms to elevate their standards, resulting in better jobs and a broader manufacturing base. A phased reduction of tariffs, with clear communication, could minimize negative impacts while promoting innovation and efficiency.

In a recent interview, former Reserve Bank of India (RBI) deputy governor, Viral Acharya, expressed that President Donald Trump’s tariffs on Indian goods may serve as an impetus for positive change. Acharya posits that such tariffs could compel the Indian government to lower trade barriers, ultimately fostering competition and promoting economic growth. Indian firms, faced with global rivals, would be incentivized to improve their standards, which may result in higher-quality employment opportunities and an expansion of the manufacturing sector.

Acharya, currently the director of doctoral education at NYU Stern School of Business, emphasized that the forthcoming tariffs could transform the competitive landscape in India. He noted that while Trump plans to impose reciprocal tariffs starting April 2, 2025, the resultant challenges could also yield opportunities for innovation and efficiency within Indian industries. Economists have indicated that India could suffer significantly because of these tariffs due to a notable 10% differential in trade policies between the two nations.

The Indian government is reacting to these looming tariffs by contemplating reductions in import taxes on American products such as automobiles, chemicals, and electronics. Acharya discussed how welcoming foreign firms could facilitate not only direct competition but also the potential for substantial knowledge transfer through strategic partnerships with international players, leading to the emergence of globally competitive companies.

He pointed to a study in which he discussed how India’s largest firms have thrived by benefiting from high tariffs that shield them from foreign competition. To achieve a more sustainable economic landscape, he advocates for a phased approach to lowering tariffs, accompanied by clear communication of objectives to mitigate adverse effects on local industries. This course of action could drive necessary investments into efficiency, innovation, and workforce development for a transformative shift in the Indian economy, akin to reforms observed in the 1990s and 2000s.

In conclusion, the potential implementation of tariffs by the United States may prompt beneficial changes within the Indian economy. Former RBI deputy governor Viral Acharya argues that the ensuing competition could lead to heightened standards among Indian firms, growth in the manufacturing sector, and the creation of quality jobs. Furthermore, a strategic and gradual tariff reduction could help Indian industries adapt and thrive in the global market, fostering a transformative economic landscape.

Original Source: www.hindustantimes.com

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