Explained: How India can benefit from striking trade deal with US

India Today

2 days ago

A trade deal between India and the United States might finally be around the corner. And while the headlines focus on tariffs and tricky negotiations, there's a bigger question at play: Can India turn this into a long-term win?Former RBI Governor Raghuram Rajan believes the answer is yes, provided India plays its cards right.It may be noted that US Commerce Secretary Howard Lutnick recently hinted that a long-pending trade agreement with India may be wrapped up in the coming weeks.advertisement
On the surface, it might seem like New Delhi is being nudged to lower tariffs under pressure from Washington. But Rajan doesn't see it that way.In an interview with India Today TV, Rajan was asked whether India should push back or play along, especially with US President Donald Trump stirring the pot again. He responded that there's no harm in cutting tariffs if it helps us in the long run.'Well, so long as we are careful about the areas which still need some support. I mean, certain parts of the agricultural sector will still need uh some support, so long as we are careful about that, broadly speaking, reducing our tariffs could be beneficial for us even as we make a play for becoming host to many of the supply chains that crisscross the world,' he said.advertisement'So in that I don't see it as a win-lose if India accepts lower tariffs and does a deal with the United States. I don't see it as us kowtowing to them but we have to do it with our interests in mind.'The idea, Rajan said, is not to give in, but to think strategically. And if done right, it could actually fire up Indian industry.'Where are the areas that we can easily afford to bring down tariffs? Our industry in many situations actually becomes more competitive when they're forced to compete with imports and uh compete on a global stage,' he said.'Remember in the early 2000s we were world beaters. Our industry felt it could take on the world. We need that kind of uh of um sort of enthusiasm again.'But that's not the only thing India has to consider. Rajan flagged a potential knock-on effect from US-China tensions. If the US sticks to steep tariffs on Chinese goods, where will those products go?'That said, you know even as the tariffs get sort of settled, there is the huge issue of if the tariffs on China remain high from the United States. Chinese goods will look for a home elsewhere and you know one of the homes will be India,' he said.advertisementThat puts India in a tricky spot. Lowering tariffs for the US might invite a flood of Chinese imports, unless India plans carefully. 'So we will have to figure out how we manage that without on the one hand reducing tariffs to the US but elevating tariffs to the rest of the world,' he added.'We need to be very clever about it. Where we benefit from Chinese imports and we should focus on keeping tariffs low but of course, and where there is dumping we have to be careful about having an open door,' Rajan explained.Simply put, Rajan's pitch is for smart economics. If India can use this moment to sharpen its trade strategy while protecting what matters, there's a real chance to come out stronger.Must Watch