Question 1 · 214 words written
Q1.
Opening
The Reciprocal Tariff plan of USA is a Tit-for-Tat game, which has escalated a new series of trade wars, a shift from liberal free trade position. India was called "Tariff king" and faces a ~26% tariff.
Body · points
Economic challenges for India
- Possible slowdown Tariff ↑ → Export ↓ → Production ↓ → investment ← savings ↓ ← wages ↓
- Imported inflation due to retaliatory tradewars Eg oil imports (85% energy needs)
- Uncertainty ↑ < investment ↓ / currency fluctuation ↑
- H1-B visa changes: Talent mobility issues
Geopolitical challenges
- Russia-China axis strengths
- De-globalisation → failure of multilateralism
- Threat of sanctions: Iran and Russia crude oil
Opportunities for India
- Lower Tariff than competitors Eg: Vietnam (~ 48%), Bangladesh (~ 37%), China (> 100%)
- Opportunity for Textile sector
- Exemptions to pharma sector (major export)
- Boost to Electronic manufacturing
- solar panel exports ↑
Steps India should take
- Sign FTAs with US, EU, etc.
- Regional integration Eg: BIMSTEC chamber of commerce
- Strategic multialignment Eg: US/EU - BRICS/SCO, "Dragon-Elephant Tango"
- Capitalise on China+1 through PLI, MII, etc.
- Boost Domestic Demand through Budget Reforms (2025) and Repo cuts
Close
"Trump's Transactional America first stance is good for India... promotes multipolarity" (EAM Jaishankar)