Trump tariffs-A dark cloud and a silver lining

Hans India

16 hours ago

US President Donald Trump has suffered a bad press in India. Still, it is indisputable that the crisis his tariffs have triggered for our economy may not be such a bad thing: it has already goaded the government to reset the GST and FDI regimes. It is a truism that crises force governments into long-overdue reforms, and the present turbulence may, paradoxically, prove to be an inflection point for India's economy. Early signs indicate that Trump's tariffs have broken the policy inertia of the Narendra Modi government; it is rethinking the goods and services tax (GST), foreign direct investment (FDI), and export promotion policies.
The government is reportedly working on a 100-day reform agenda prepared by the Commerce & Industry Ministry. It is not merely a firefighting exercise but a comprehensive strategy to improve India's global competitiveness. This is significant because, for too long, India has managed its trade policies reactively, focusing on ad hoc measures rather than laying down forward-looking, structural reforms. Another key area under review is the GST regime. While GST has streamlined indirect taxation, its complexity and compliance burdens have stifled smaller exporters and startups. Rationalising and reducing GST slabs, simplifying compliance, and ensuring quicker refunds could ease liquidity pressures and incentivise export-oriented businesses.
If the current crisis accelerates this process, Indian exporters may be better positioned in the medium term, not just against US tariffs but also against rising competition from countries like Vietnam and Bangladesh. Equally important is the prospect of further liberalising the FDI regime. India has already been one of the top global recipients of foreign investment, but procedural hurdles, sectoral restrictions, and unpredictable regulatory interventions have often diluted the benefits.
A push to ease investments—particularly from neighbouring countries and emerging Asian markets—signals a pragmatic recognition that India must diversify its capital inflows rather than remain overly reliant on Western investors. Such reforms could open up capital for high-growth sectors like digital infrastructure, renewable energy, and advanced manufacturing. The government's reported plan to provide more tax incentives for startups also reflects an awareness of the shifting global economic landscape. With traditional manufacturing exports facing headwinds, India must increasingly rely on knowledge-driven industries, digital services, and innovative startups to power growth.
A supportive tax regime, combined with easier access to foreign capital, could help create globally competitive unicorns and deepen India's digital economy. Then there are proposals to ease certain environmental norms for the leather and footwear sectors. These industries employ millions, generate significant export revenues, and are heavily labour-intensive—precisely the kind of sectors India needs to expand if it hopes to absorb its growing workforce.
While the idea is good, the government must ensure that this easing remains focused on cutting red tape; there should be no adverse impact on the environment. On the export infrastructure front, the emphasis on establishing e-commerce hubs and fast-tracking initiatives like BharatTradeNet is timely. Global trade is increasingly digital, and seamless integration of logistics, customs, testing, and certification into unified platforms could sharply reduce transaction costs for exporters.
By enabling smaller firms and startups to tap global markets with fewer bureaucratic hurdles, such steps could democratise trade opportunities across sectors and geographies. If all these reforms are implemented effectively, they could make India's export basket more resilient and its domestic economy more attractive for investment.