It’s been six months and more since India had been anticipating increased tariffs on exports to the US in Trump’s new term as US president, and yet there was no reporting on it in the Indian news media, except to keep harping on the fact that India could attract 26% reciprocal tariffs. The Indian government and the media have been tight-lipped about it as if discussions were under wraps and the nation shouldn’t know what was being negotiated.
Now that Trump has made the announcement of 25% tariffs on Indian exports to the US plus another 25% tariffs as penalty to be levied on India because we continue to import arms and oil from Russia, the media is all aflutter. It is still a mystery as to what has transpired in the past six months or more between the teams negotiating on both sides, when we had all the time to prepare and negotiate a trade deal with reduced tariffs. Other than the fact that the Indian government wants to protect Indian farmers and that being the sticking point, there was very little reported on the subject.
Leaving the media’s handling of it aside – which is all probably unprofessional PR agency idiot bosses’ doing – the larger question of how India should deal with the US in terms of trade negotiations needs to be considered. I think we ought to have negotiated harder and by this, I mean, we ought to have negotiated with India’s strategic and long-term interests in mind. Not merely reacting to Trump’s tariffs and US demands which is how it all seems at the moment.
Protecting our farmers is an age-old Indian government policy, since the farming community is the largest vote bank in the country for any political party. While every political party likes to court them, rarely have they really bothered to improve farmers’ lot in terms of earnings, nor have they been able to reduce the dependence on agriculture for employment. I think that closing the door on discussions on farming and farm produce with the US without exploring greater Indo-US cooperation on GM crops and its research in India so that India gains from new technology and can further its agricultural scientific knowledge, is a huge lost opportunity.
We ought not to forget that India’s self-sufficiency in food production came in the 1960s as a result of working with American scientists and ushering in the Green Revolution in India then. With a growing population of 1.4 billion people already, we must explore new avenues in agricultural research and better farming practices and GM foods, in order for our farmers to do better and for us to be able to be self-sufficient in crops other than foodgrains. We cannot develop a mental block against GM foods, and must allow the science to inform and guide our decisions. As also its suitability, in terms of water, soil and fertilizer requirements, etc. If Indian agricultural scientists at ICAR and elsewhere – who are already doing a lot of research on new crop varieties – can work with US scientists to cooperate and jointly research new GM crops for India, India and Indian farmers ought to gain from such efforts. Because I believe India is ready for a second Green Revolution.
From this one example that I have taken, of agriculture, since it seems to be a subject where the Indian government is not willing to compromise, I intend making a larger observation and suggestion. All negotiations require compromise in order for an agreed solution to emerge. My larger observation on these ongoing India-US trade negotiations is that we have not been able to steer them in the right direction of greater economic cooperation over the long-term. The critical piece missing in these discussions is American investment in India. Where Trump would like to push us on import tariffs and access to our markets – given his transactional approach – we ought to have taken the discussions towards long-term investment in India and joint economic activity, such as in agriculture. This would have preserved our independence in negotiating on our terms, while also giving the US a little more access to our markets in areas that don’t cost us.
Outside of agriculture, India needs new technology and investment in semiconductor manufacture as well as in clean technology and in renewables. These are industries that could benefit from American companies’ investing in India, and therefore we ought to have taken a more strategic approach in negotiating tariffs. Whatever happened to the huge investment that Micron Tech was to make in India in semiconductor manufacture – including technology transfer – that was touted as Modi’s big win from his visit to the US in 2023? Or was it just another PR gimmick?
If you look at how Trump has managed to secure trade deals with some countries and regions such as the EU, Japan, South Korea and Taiwan, it is on the basis that these countries will invest hundreds of billions of dollars in the US over a specified period. India is not in a position to make such massive investment commitments in the US, nor should we, but we ought to have used US investment in India as a key negotiating tactic and requirement in our discussions. We ought not to give in to bullying by Trump or anyone else, but we also ought to be clear-eyed and strategic in our long-term vision for India.
As far as India’s energy needs and security are concerned, we ought to make it clear to all concerned that our sovereignty is sacrosanct and we are free to make our own decisions on trade and all other matters. We import oil and gas from several countries, depending on prices and long-term contracts, even as we continue to push on renewables. And in defence production, India has now opened up the industry to the private sector, with many of India’s large corporations participating along with foreign companies.
Unfortunately, in these areas as well, India has not been able to seek greater inbound and out-bound investment. On energy particularly, I have written about how India ought to increase its participation in SCO and engage more with Central Asia where our Indian government and Indian companies can invest to secure India’s long-term energy requirements. The US is clearly making energy and defence instruments of not just its industrial and trade policy, but its foreign policy as well, and we have to learn how to cope with this reality all over again.
In industries where India is somewhat competitive such as information technology and pharmaceuticals, we have to move up the value chain and also diversify our exports. In fact, I have already written that we should diversify our exports as much as possible, so as to reduce dependence on America. India should look at the rest of Asia, Latin America and Africa as export markets with huge long-term growth potential. Having worked on a trade deal with the UK, we should quicky conclude the negotiations with the EU and see how to strengthen economic ties with China and Japan. Speaking of China, we ought to be seeking greater market access to the Middle Kingdom as well as indigenising production of APIs (active pharmaceutical ingredients) on which we are totally dependent on China.
Overall, it appears then that India needs to work harder at becoming more strategic, competitive, and long-term in our engagement with the world. While it might seem that the US is keen to sell us things – including many we don’t perhaps need – we need to steer the discussions towards what our country needs to grow its economy over the long-term. This necessarily means a more enduring, mutually beneficial trade and investment partnership, not a mere sale. This goes for the entire world, of course. In the Trumpian world this might seem like a tall ask, but for the sake of India’s true and long-term independence every negotiating tactic concerning India’s economic future is worth employing. On India’s 78th Independence Day, I cannot stress this enough.
The animated owl gif that forms the featured image and title of the Owleye column is by animatedimages.org and I am thankful to them.
Peripatetic Perch 