India should capitalize on the trade upheaval sparked by Trump’s policies
Striking a balance between diplomacy and reform could be the key to realizing India’s long-awaited manufacturing ambitions.
The world has reeled from the sweeping tariffs announced by US President Donald Trump who later announced a 90-day pause against most countries. However the trade war with China has only escalated and the baseline 10% tariffs against every nation remains. What the see-saw of the last week has established even more clearly is that Trump is wildly unpredictable and many of his threats are not just empty noises. The 90-day pause will give many countries a breather to see what best they can negotiate with the Americans.
For India, there is a massive opportunity in this turmoil. By choosing not to react harshly or retaliate against the US, India thinks it is handling Trump with pragmatism. It is not an easy position to be in, especially when you have to balance the interests of your own industries and exporters against a bully who wants his own way.
But more than that, this would be the right time for India to relook at it’s own protectionist schemes that have made red tape and licence raj a nightmare for all businesses.
Quality Control Orders
The ‘Quality Control Orders’ or QCO, perhaps the worst of Indian protectionism, were started in 2019 as part of the government’s plan to revive manufacturing in India and curb sub-standard imports. But the quality control checks, which subjects importers and domestic businesses to conform to certain standards, have made it much more difficult for foreign companies to enter the Indian market while adding to problems for home grown companies that import their materials. To add to the delays, the quality certificates are only given after an Indian inspector visits the manufacturing facility. This applies to toys, footwear furniture and many more products. Imagine, a luxury giant like Valentino is also subjected to these quality checks of its footwear. It is absurd.
The hassle created by the quality control orders was one of the points highlighted by the US government in a report released earlier this month which described the norms as “burdensome”.
If India does away with the QCO on most products, it will be a huge confidence building move with the US as New Delhi tries to close in on a trade deal later this year.
A protracted US-China trade war is not good for India and has the potential to raise costs for products sold here, cause market volatility and even hit growth. But there are silver linings too. American importers may turn to India instead of China especially in sectors like textiles, electronics, auto components and Pharma. But we really need to get our act together and make ease of doing business in India a reality and not just a slogan. India missed the bus on ramping up its manufacturing capabilities which saw for example garment manufacturing moving on a big scale outside China to Bangladesh and Vietnam. This has to change.
Indo-China trade ties
There is also an opportunity here for India-China trade ties. Beijing has said it is ready to import more products from India and the shared challenge of higher American tariffs could give the two Asian giants a chance to re-look at their own trade cooperation.
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