Amid growing concerns over US President Donald Trump’s tariff policies, a report by Motilal Oswal suggests that India could leverage the situation to strengthen its domestic industries and focus on self-reliance.
The report acknowledges that while tariffs present challenges, including increased costs, exchange rate fluctuations, and potential export losses, they also create opportunities for India to boost local production and reduce reliance on imports.
“While the escalating costs, exchange rate volatility, and potential export challenges are concerning, India has the chance to capitalize on these trade tensions to strengthen its domestic industries,” the report stated.
In recent years, the US has imposed significant tariffs on Indian exports. In 2018, the US levied a 25% tariff on USD 761 million worth of steel and 10% on USD 382 million worth of aluminum imported from India.
These higher tariffs made Indian products less competitive in the US market, leading to a 46% decline in steel exports within a year. As American buyers opted for cheaper alternatives, Indian businesses faced substantial losses.
Another concern highlighted in the report is the impact of the tariff war on India's currency. India imports 87% of its crude oil and pays in US dollars. A weaker rupee, resulting from capital outflows due to global trade tensions, would make oil imports more expensive, adding further pressure on India’s economy. The report suggests that a prolonged tariff war could potentially reduce India's GDP by 0.3%.
Despite these challenges, the report suggests that India can turn the situation into an opportunity. Historically, India has maintained higher tariff rates compared to other major economies. By strategically using import duties and strengthening domestic industries, India can reduce its dependence on foreign goods and increase self-sufficiency.
The report emphasizes that the ongoing trade conflict should push India to focus on manufacturing self-sufficiency and expand exports in sectors less affected by tariffs.
Trump’s policies aim to balance protectionism with the goal of maintaining U.S. competitiveness globally. While this creates uncertainty, the report suggests that India can use this situation to its advantage by promoting domestic production, attracting local investments, and improving trade agreements with other countries. (Source: ANI)
