Large sections of Indian industry, including sectors that are seen to be relatively more vulnerable to the reciprocal tariffs by the US, appeared largely unperturbed on Wednesday ahead of the Donald Trump’s administration’s imminent disruptive move.
Several key industries that have high interest in the lucrative US markets, including electronics, pharmaceuticals, auto parts, and gems & jewellery, feel import duty cuts by New Delhi would be the best way to mitigate any adverse impact on their shipments. This will reduce the tariff gap between the two nations, which is a substantive 5% on a country-wide basis and much higher for scores of individual products.
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Even after the reciprocal levies are announced by the US, New Delhi would have the window to lower its tariffs, and urge the US to readjust its levies in keeping with the reciprocity principle.
Zero-for-zero tariff policy might work for India in sectors like pharmaceuticals and gems & jewellery, and to a certain extent, even textiles & garments, analysts feel. Many trade experts also reckon that India could withstand reciprocal tariffs without retaliation, while others recommend an approach that combines accommodation with selective retaliation.
While the nature and scope of the US’ additional tariffs on merchandise shipments from India remained “amorphous,” the government here opted to remain circumspect and tight-lipped. While commerce and industry minister Piyush Goyal had said the industry was “excited” about the quick-paced negotiations for a bilateral trade agreement (BTA) with the US, he also asked some elements of it to not seek “over-protection.”
Government circles and independent analysts also feel Trump’s reciprocal tariffs could create opportunities for the country in several sectors. Niti Aayog pointed out that unlike Mexico, China and Canada, which account for 50% of the US’s total imports and face 20-25% tariffs, India is “favourably placed.” For India, in many instances, an increase in influx of imported inputs could make domestic value addition more efficient. Domestic companies in many export-intensive sectors could potentially make incremental gains in export markets from the relatively higher tariff walls major competitors like China have started facing.
Analysts estimate reciprocal tariffs might chip away just about 0.1% or thereabouts of India’s gross domestic product. “With a tariff differential of 9%per cent and assuming that the elasticity of India’s exports to the US with respect to tariffs is minus 0.5 (implying a 1%nt rise in the tariff rate would reduce India’s exports to the US by 0.5%),
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