Best of BS Opinion: India could face trade and investment challenges

Business Standard

13 hours ago

Hello and welcome to BS Views, our newsletter that is your window into today's opinion page. Our lead editorial today looks at the chaos that President Donald Trump's tariff threats have unleashed upon the global trade order, and how they might impact India's trade and investment. The Reserve Bank of India's 'Financial Stability Report' cautions that growing trade disruption and geopolitical tensions can negatively affect India's domestic growth outlook. India's trade deal could have consequences for multiple tradeable sectors' growth. US policies could also affect global capital flows, impacting investments and that could have a deleterious effect on India's current account standing. The good news is that domestic economic parameters are holding steady, even improving, but any more global shocks could constrain a revival of investment.
India has made notable improvements in its logistics ecosystem, driven by advancements in port infrastructure, multimodal connectivity, digital integration, and a renewed emphasis on trade facilitation, notes our second editorial, reading from the World Bank's recent report on country-wise performance. Trade-facilitation reforms, including digitisation, pre-arrival processing, and the Authorised Economic Operator (Aeo) programme, are steadily reducing average release times (ARTs), especially for imports. Exports, though, face longer clearance times. Given that logistics costs in India are 14-18 per cent of gross domestic product, much higher than the global benchmark of 8 per cent, further reforms are needed for India to become a reliable export hub and an attractive destination for global manufacturing.
Our first columnist Laveesh Bhandari ponders the use of artificial intelligence to cut through the Gordian knots of governance. He argues that given AI's speed, if used for research, many tasks can be completed in a few weeks or days, perhaps even less. Besides, considering the information and intellectual gap between the top and bottom levels of government, AI can empower lower-level officials to enhance the ability of the higher-ups. India also has a unique opportunity that many others do not in the form of Digital Public Infrastructure, which has access to granular data and thus can be used for decision-making. However, challenges exist in the form of AI's hallucination, inherent reasoning biases, and unevolved ethical and moral core. And given that many governmental decisions only have smaller impacts individually, the human-AI interface needs to be different depending upon the scale of the potential impact. Thus, frequency and impact should be two key dimensions to assess AI, he says, and that by unpacking the problem we can better identify how AI should be used and derive the consequent benefits.
The world, and India, is facing a demographic time-bomb in more ways than one. Not only will there be hundreds of millions looking for active work, there will also be millions more who will need caregiving as they exit the workforce but continue to live for many more years without paying work. Arun Maira points out that the care of these seniors will fall upon the young, but with limited earnings and ever-rising private healthcare costs, instead of societal assets, they are likely to be seen as economic liabilities. Worse, there is no solution in sight. The writer argues that it may be time to reimagine society as a 'caring' enterprise instead of a 'paying' one. We should not damage the quality of a society to grow the economy. Instead, the economy must be redesigned to improve the quality of society.
Sanjeev Ahluwalia unpacks what he calls the 'Das Principles' in his review of Abhijit Das' Strategies in GATT and WTO negotiations. The book defends the benefits of trade multilateralism at a time that United States has been damaging the basic framework of the World Trade Organisation (WTO) with its (read Trump's) unilateral tariffs against all and sundry. Das also points out that China played the game well by not trying to change developed nations' rules but by taking advantage of them. On the other hand, he says, India's WTO negotiators brilliantly defended 'perceived' national interest, but did they even read the national interest correctly? In our aversion to political risk, India successfully resisted externally driven trade and investment reform, even at the risk of scoring long-term self-goals.