Economy

‘Whatever You Charge, I’m Charging’: Trump Reveals Modi Couldn’t Stave Off Tariff Hike

‘I told Prime Minister Modi yesterday — he was here. I said, “Here’s what you do. We’re going to do — be very fair with you.’

New Delhi: US President Donald Trump’s public comments on how his conversation on tariffs with Prime Minister Narendra Modi went has unveiled a fact that the Indian government has been keen to side-step – that India has not avoided a tariff hike despite the purported bonhomie that Modi has been keen to project with Trump.

In an interview to Fox News along with his billionaire adviser, Elon Musk, Trump said, according to the White House transcription:

“(E)very country in the world takes advantage of us, and they do it with tariffs. They makes — make it — it’s impossible for him to sell a car, practically, in, as an example, India. I don’t know if that’s true or not…”

Musk then chips in with a note: “The tariffs are like 100% import duty.”

“Now if he built the factory in India, that’s okay, but that’s unfair to us. It’s very unfair,” Trump said of Musk’s plans.

Trump then went on to describe his conversation with Modi:

“And I said, “You know what we do?” I told Prime Minister Modi yesterday — he was here. I said, “Here’s what you do. We’re going to do — be very fair with you.” They charge the highest tariffs in the world, just about.”

When Fox’s Sean Hannity asks if the tariffs are “36%”, Trumps says it is much higher and Musk says that auto imports are “100%.” However, India’s new EV policy offers a 15% reduction on import duties provided the carmaker makes a substantial investment in the country and sets up a local factory – something that is likely to help the Tesla CEO.

“Yeah, that’s peanuts,” Trump goes on to say, agreeing with Musk. “So, much higher. And — and others too. I said, “Here’s what we’re going to do: reciprocal. Whatever you charge, I’m charging.” He goes, “No, no, I don’t like that.” “No, no, whatever you charge, I’m going to charge.” I’m doing that with every country.”

The US president then goes to say that “nobody can argue” with him.

“You know, the media can’t argue — I said — they said, “Tariffs — you’re going to charge tariffs?” You know, if I said, like, 25 percent they’d say, “Oh, that’s terrible.” I don’t say that anymore — because I say, “Whatever they charge, we’ll charge.””

India has not addressed whether the meeting between Trump and Modi was effective in actually stalling the hike in tariffs that Trump had been promising.

A Few ‘People’s Budget’

It is rather amusing that in today’s context, when the winds seem to be changing directions and there are talks of higher tariff walls and protectionist moves, the prescription remains the same – more deregulation.

Much of the discussion in the follow up to the economic survey and the Union budget has been around the tax reliefs for the middle classes. The effective beneficiaries of this relief is less than 2% of the country’s population. However, the air time given to this in the budget analyses in newsrooms has overshadowed certain other pertinent and pernicious ideas that were in the realm of deregulation.

In fact, finance minister Nirmala Sitharaman in her budget speech announced the setting up of a high-level regulatory reform committee that will share its recommendations in a year’s time towards promoting ‘ease of doing business’. This committee has been tasked to “unclog the regulatory cholesterol” particularly in laws pertaining to inspections and compliances.

There, of course, has been a concerted push towards “trust based governance” in successive budgets and subsequent easing of clearances over the recent years. Yet, it is imperative that we analyse both – the rather curious rationale, as well as the implications of what appears to be a concerted push towards further regulatory dilutions this year.

Deregulation refers to a policy-driven dilution of government regulation over key sectors, activities and procedures. Scaling down environmental protection criteria, striking off labour welfare measures, allowing private investment and ownership in sectors of public importance such as coal, are some of the instances of deregulation that the government uses, often in the name of boosting ‘growth’.

However, past experiences show that diluting government control has worked in favour of big business at the cost of labour, environment and more. It is for this reason one must track its push towards deregulation.

Shifting symptoms, yet same prescriptions

The economic survey provides the material and philosophical underpinnings of the urgent need for deregulation or what it calls “getting out of the way”. One of the rationale it harnesses is from the current geopolitical changes. It, in fact, correctly outlines the tectonic shifts that are unsettling many of the certainties of the earlier decades. Be it the Trump tariffs, the geo-economic fragmentations or the trade wars, it highlights that “the promise of shared benefits from a globalised world with open trade, free flow of capital and technology, and sanctity for rules of the game may be behind us”.

It outlines the implications of the same in terms of the anticipated fall in our global exports and also a shake-up in the foreign direct investments that had been aided over the decades by liberalised trade and globalisation. It also correctly identifies that in this changed geopolitical scenario “we need to intensify our efforts on the domestic front”.

However, the prescription it has on offer for this diagnosis seems to be the same as the one given thirty years back and for exactly the opposite symptoms.

It says that we need to look inward, that we need to unleash the potential of domestic-led growth. And for that we need deregulation. Thirty years back when the “winds of change” were blowing towards open markets and free trade, we were told that we must deregulate and ease rules for businesses to flourish, for foreign direct investments to find our shores habitable.

Also read: It’s Time to Re-Regulate, Not De-Regulate

Under the unambiguous motto of ‘ease of doing business’ the first two decades of the 21st century saw the World Bank champion the push to marketise and privatise key resources and areas such as water, education and health, and harness them for private profits and global capital. Anchored in the ‘ease of doing business index‘ jointly developed by the World Bank, this approach faced severe criticism for encouraging dilution of labour and key regulatory social and environmental safeguards, especially in ‘developing’ countries.

We were told that governments must step aside in the name of promoting business friendliness. So, hasn’t the government been “getting out of the way” for the last thirty years in any case? It is rather amusing that in today’s context, when the winds seem to be changing directions and there are talks of higher tariff walls and protectionist moves, the prescription remains the same – more deregulation.

That seems rather convenient.

Squeeze labour per unit of investment

The economic survey says that in the absence of export-driven growth and given the apprehensions about falling foreign direct investments, we need to concentrate more on the “efficiency” of investments. That is the only way, it says, of maintaining the levels of high GDP required to achieve the status of ‘Viksit Bharat’ by 2047.

How can efficiency be improved? “By reducing the time taken for investment to generate output and by generating more output per unit of investment,” it says.

That is what deregulation is expected to achieve by easing clearances and eroding compliances related to labour protection, workers’ well being and the environment. In other words, we need to attain the ‘Viksit Bharat’ status by following a growth path that squeezes labour.

In a cynical twist of logic, the survey argues how regulations meant for protecting workers in fact act against them and their supposed “long term” interests. As firms try to avoid such compliances, they tend to stay informal and avoid scaling up, it says. This, it says, in turn discourages job creation, limits wages and encourages informal employment. As a result, it advocates the removal of hard earned labour rights thereby in effect blurring the lines between the formal and the informal.

Also read: ‘Indians Spend a Third of Their Salary on Loan EMIs’: Report

In effect, it argues for giving up even the idea of decent jobs or labour welfare. As examples, it cites what it considers “unnecessary” rules like “double rate for overtime work”, like the provision of “rest-rooms or canteens” in factory premises, or even “safety measures mandated for women” working in night shifts.

Similarly, it says that our compliance and inspection based regulatory framework is not realistic and is better done away with. As an example it cites that only “644 working inspectors are available to oversee compliance in 3,21,578 factories, with each overseeing around 500 factories”.

However, while several labour rights activists may quote the same figures to argue for more inspectors, the economic survey argues in favour of doing away with such “unrealistic expectations”. Despite having the ambitions of a ‘Viksit Bharat’, it seems we don’t have the state capacities (it claims) to actually undertake such oversight over labour conditions.

In other words, our path towards a ‘Viksit Bharat’ needs to pass through sweat-shops and unregulated hours where the maximum can be squeezed per unit of investment.

A race to the bottom

The proposal to develop the Investment Friendliness Index as a marker of ‘competitive cooperative federalism’ further imagines states as competing markets and state governments as fund raisers.

The new Index is yet another addition to NITI Aayog-monitored indices such as Global Innovation Index, Indian Innovation Index and Export Preparedness Index. Offered as neutral performance indices, these measurements, as in the case of World Bank indices, promote real world governmental actions.

What this effectively means is that states are encouraged to compete in a race to the bottom as to who offers the worst deal for labour, health, environment and climate.

After all, none of these are novel ideas. We have witnessed the “efficiency” with which deregulation over the last three decades has eaten into the workers’ share and has fattened profits.

In the 1980s, the average share of Gross Value Added that went to workers’ wages was 24.7%, while the share that went to profits was 15.0%. By the 1990s, this had reversed, with wages declining to 15.9% and profits increasing to 24.2%.

Over the last decade, that is 2012-2023, the situation has worsened further, with wages stagnating at 13.0%, while profits have surged to 40.0%. This reflects a systematic decline in labour compensation as we have trampled upon workers’ rights in the name of ease of business.

Table 1. Percentage share of factor payments in GVA (nominal prices)

Principal characteristics of factories – All-India aggregates

Time Period	Wages	Other Worker Payments	Rent	Interest	Profits	Other Payments	GVA
1982-1992	24.7	13.8	1.3	23.3	15	21.9	100
1992-2002	15.9	11.5	2.1	22.9	24.2	23.3	100
2002-2012	10.7	11.0	1.6	11.5	45.5	19.7	100
2012-2023	13.0	15.0	0.9	12.4	40	18.7	100

Source: Annual Survey of Industries, various years, as reported by the Economic and Political Weekly Research Foundation (EPWRF).

Note: For the decades, the y-o-y average has been taken.

Share of factor payments in GVA

In whose name and for whom?

It is insidious that the economic survey shoots its deregulation agenda from the shoulders of the MSMEs. It argues that deregulation is “more critical for MSME growth than large enterprises”.

While large enterprises tend to find a way around compliances, it says that it is the smaller enterprises that are at the receiving end of compliance costs of regulations. However, that was the very precise criticism that was posed against the goods and services tax (GST) which the economic survey still celebrates as one of the government’s biggest achievements in terms of reform.

GST was a major shock that hit the unorganised sector the hardest and the worst sufferers were the MSMEs. A survey-based report released at the end of 2022 reveals that of the enterprises covered, 53% of the MSMEs reported a 10%-30% reduction in turnover, while 36% reported their turnover to have reduced by more than 30% after the implementation of the GST.

Among them, it is the micro-enterprises that reported the greatest losses.

Be it in terms of the dilutions in environmental clearances or the erosion of labour related compliances, it is always the bigger players and the corporates who will benefit the most from deregulation.

Likewise, it is India’s working masses at the bottom of the pyramid who would be at the receiving end in terms of lost rights and declining share in wages.

Also read: Unemployment and Price Rise Biggest Failures of the Modi Government: Survey

If the government really needed to boost the MSMEs, it could have done so by subsidising their capital input costs – machineries, equipment or loans, instead of diluting labour/environmental laws. If the government was really interested in boosting aggregate demand, it would have increased spending on quality public healthcare, education and social security, instead of tax reliefs to such a small segment.

It would have created decent jobs with livable wages instead of advocating for further deregulation.

Finally, even as the consensus on globalisation among its erstwhile champions in the West is under severe strain, it seems that the strategies evolved by the World Bank for penetration of global capital into the third world continue to be relevant in this changed scenario.

They are being deployed by India to create a more ‘friendly’ environment for private profiteers – mainly domestic businesses but also global ones. These are likely to benefit segments of favoured Indian industrialists.

Anirban Bhattacharya is a Consultant at the Centre for Financial Accountability (CFA). Amitanshu Verma works with the National Finance team at the CFA. Pranay Raj works as a Data Analyst at the CFA, New Delhi.

PM-SYM: A Pension Promise in Peril

A significant limitation of PMSYM is the income cap of Rs 15,000 per month, which excludes a considerable number of workers lacking pension security. This exclusionary criterion effectively denies pension security to a significant section of the workforce.

In the 2025-26 budget, the Union government increased the allocation for Pradhan Mantri Shram Yogi Maan-Dhan (PM-SYM) scheme to Rs 244.02 crore, signalling a renewed focus on pension security. While this increase suggests greater attention, it remains insufficient to address the scheme’s fundamental shortcomings.

Launched in 2019 through a notification by the Ministry of Labour and Employment under the Unorganised Workers’ Social Security Act, 2008, PM-SYM aims to provide a monthly pension of Rs 3,000 to unorganised sector workers post 60 years of age.

However, structural constraints, restrictive eligibility and chronic underfunding continue to hinder its ability to serve India’s vast unorganised workforce effectively.

A significant limitation of PM-SYM is the income cap of Rs 15,000 per month, which excludes a considerable number of workers lacking pension security. This exclusionary criterion effectively denies pension security to a significant section of the workforce.

Also read: Social Security Pensions: Right to a Dignified Retirement for the Poor

PM-SYM is structured as a voluntary and contributory pension scheme specifically for unorganised workers aged 18 to 40, with a monthly income ceiling of Rs 15,000. Eligibility is further restricted to individuals who are not already covered by other pension schemes such as the National Pension System (NPS), Employees’ State Insurance Corporation (ESIC), or Employees’ Provident Fund Organisation (EPFO) and who are also not income tax-payers.

The scheme targets vulnerable populations, including home-based workers, street vendors and agricultural labourers. Enrollment necessitates an Aadhaar card and a savings account with the Indian Financial System Code (IFSC). Subscribers are required to contribute a prescribed age-specific amount monthly until the age of 60, with the central government providing a matching contribution.

In the event of a subscriber’s death before reaching 60 years of age, provided regular contributions have been made, the spouse has the option to either continue the scheme or withdraw as per the established provisions. Contributions are facilitated through auto-debit from the subscriber’s designated savings account. As of the latest available data, over 46 lakh unorganised workers have successfully enrolled in the scheme. However, despite this enrollment success, PM-SYM faces several structural and implementation challenges that warrant careful consideration.

These challenges include the absence of a demonstrably clear and readily accessible dispute resolution mechanism. Clause 6 of its notification stipulates that eligibility doubts are referred to the Joint Secretary and Director General, Labour Welfare, in New Delhi. This centralised process presents challenges for workers in rural and remote areas seeking to challenge wrongful exclusions, potentially discouraging appeals and lowering overall participation.

Anothe concern is the restrictive definition of ‘family’ under PM-SYM. The scheme provides a family pension only to the spouse, covering 50% of the subscriber’s pension as outlined in Clause 9 of the notification. Upon the death of both the subscriber and spouse, the accumulated funds revert to the government’s pension corpus instead of being passed on to legal heirs.

Furthermore, PM-SYM lacks nomination provision, a standard feature in most pension schemes. Unlike schemes under the Payment of Arrears of Pension (Nomination) Rules, 1983, PM-SYM does not allow subscribers to designate a nominee, raising concerns about the distribution of pension contributions after the subscriber’s death.

Also read: Turning Silver into Gold: India’s Aging Workforce Needs to Be Utilised

Chronic underfunding remains a critical concern beyond these structural deficiencies. The government allocated Rs 244.02 crore for PM-SYM in 2025-26, an amount that may be inadequate given India’s large unorganised workforce of over 38 crore. The parliamentary standing committee on labour, textiles, and skill development has noted this limited financial commitment, observing that PM-SYM is far from achieving its enrollment target. Actual enrollments have fallen short of the initial goal of 10 crore within five years since the launch.

The committee’s report suggests that PM-SYM’s low allocation may reflect a lack of prioritisation for social security in the unorganised sector. In comparison, other pension schemes like the Atal Pension Yojana (APY) have received greater financial support and achieved higher participation rates.

Changes needed in PM-SYM to ensure pension security

Structural reforms are necessary to enhance the effectiveness of PM-SYM. Potential adjustments include raising the income cap to Rs 18,000-Rs 20,000 per month to better align with prevailing wage structures, which would enable more workers to enroll. Decentralising dispute resolution by empowering state and district labor offices could enhance accessibility. Expanding the definition of ‘family’ to include dependents such as children and elderly parents could provide broader financial security.

Introducing a nomination provision could ensure pension savings are transferred to rightful heirs. Additionally, extending the entry age from 40 to 50 years may allow older unorganised workers to benefit from the scheme. An integrated approach could involve merging PM-SYM with APY and the Pradhan Mantri Laghu Vyapari Maan-Dhan Yojana to create a more comprehensive pension framework. Such a merger could streamline budgetary constraints and improve efficiency. APY already includes key provisions missing in PM-SYM, and integration may address many of its shortcomings.

The e-Shram portal, which maintains a database of over 30 crore workers, could be leveraged to streamline enrolment and enhance outreach. To boost participation, the government could introduce Direct Benefit Transfer (DBT) subsidies, particularly for workers who cannot afford regular contributions. Furthermore, nationwide awareness campaigns could help counter misinformation and improve enrolment rates, thereby helping PM-SYM reach its intended beneficiaries more effectively.

PM-SYM was introduced to provide pension security to unorganised workers, however, without addressing the budgetary constraints and implementation challenges, its effectiveness will remain diminished. Addressing these issues through increased funding, expanded eligibility, streamlined dispute resolution and better integration with the e-Shram portal could pave way for its success.

Utkarsh Yadav is a law student at Dr. Ram Manohar Lohiya National Law University, Lucknow.

‘Indians Spend a Third of Their Salary on Loan EMIs’: Report

The report revealed that low-income groups spent a higher percentage of their money on necessities than high-income groups.

New Delhi: Indians are spending a third of their income on paying off loan installments, a new study has found.

‘How India Spends’, a report by PwC and Perfios, anyalysed the spending behaviour of 3 million individuals who primarily used fintech, non-banking finance companies (NBFCs) and other digital platforms.

Participants of the study ranged from tier-III cities to metropolitans, with income levels ranging from Rs 20,000 to Rs 1,00,000 per month.

According to the report, upper-mid-level earners made up the bulk of those paying EMIs, while entry-level earners accounted for the least. It also found that those in lower salary brackets were more likely to borrow from friends, family or local lenders as opposed to formal sources.

The report categorises expenses into three broad categories – obligatory expenses (39%), necessities (32%) and discretionary spending (29%).

Obligatory expenses were defined as loan repayments and spending on premiums for insurance policies while discretionary spending includes expenditure on online gaming, dining-out or ordering food, entertainment etc. Necessities included basic household needs such as utilities (water, electricity, gas, etc.), fuel, medicine, groceries etc, per the report.

Necessities vs discretionary spending

“Individuals in lower salary brackets are primarily channeling most of their earnings toward meeting essential needs or servicing debt. Conversely, those in higher salary bands are allocating a significant portion of their income toward obligatory and discretionary spending,” the report said.

The report suggests that loans in the higher-income segments are indicative of higher living expenses as well as increased aspirations for luxury goods and holidays.

Discretionary spending increased from 22% to 33% as one moved from the entry-level income band to high-income bands, the report found.

“A similar trend is observed for obligatory expenses, where the percentage of spending goes from 34% for entry-level earners to 45% for high-income earners. However, a converse trend is observed for necessity expenses, where the percentage of money spent decreases with an increase in salary – declining from 44% for entry-level earners to 22% for high-income earners,” the report stated.

Lifestyle purchases accounted for over 62% of discretionary expenses, with people from high-income groups spending nearly three times as much on such items (Rs 3,207 per month) as entry-level earners ( Rs 958), the report found. Online gaming is most popular among lower earners (22%), decreasing to 12% for higher earners.

The study also found that people in tier-II cities spend the most on medical expenses, averaging 20% more per month than those in tier-I cities.

Obligatory spending

The report found that salaried individuals allocated between 34-45% of their income to obligatory expenses, 22-44% to necessities and 22-33% to discretionary expenses on average. However, this varied across different salary brackets.

“The lines between discretionary spending and future obligations have been blurred by the rise of personal lending through form factors such as embedded finance, peer-to-peer loans and credit cards, and other traditional loan categories like home loans, education loans and auto loans,” the report said.

Plummeting savings

India’s household savings dropped to a five-year low, accounting for a mere 5.1% of the GDP, according to RBI data. This, despite an increase in consumption. The decline in household assets has coincided with a surge in personal loans, which have grown by 13.7% year-on-year.

“While consumption has gone up, we have seen a decline in financial assets and savings,” Sabyasachi Goswami, CEO of Perfios, told Mint, adding that while consumption is flourishing, lower savings put stress on households.

“This is despite a 9.1 % year-on-year jump in salaries over the past six years. What we see is debt levels are rising as households buy vehicles and houses,” said Goswami.

Is India On the Way To Becoming Mortgaged to the US?

Trump’s aggressive tone and Modi’s apparent acquiescence have raised concerns about India’s ability to safeguard its interests.

Prime Minister Narendra Modi’s two-day visit to Washington last week has been hailed by many domestic foreign policy experts as a resounding success. “Defying traditional skepticism and recent anxieties about India-US relations, Prime Minister Modi and US President Donald Trump laid out an ambitious roadmap to deepen bilateral ties,” remarked a respected foreign policy analyst. Another commentator echoed this sentiment, stating, “Modi’s visit was both symbolically significant and substantively fruitful.”

However, several international media outlets have been sharply critical of India’s handling of the visit, particularly its response to President Trump’s disparaging remarks, some of which were made in Modi’s presence. Ahead of the visit, a prominent British publication argued that America’s assertive nationalism could effectively reduce India to a “partially subordinate ally,” a stark contrast to India’s long-standing self-perception as a “wholly independent actor.”

Over the past decade, and especially in recent years, India has positioned itself as a leader of the Global South. Yet, as China expands its influence across Asia, Africa, and South America, championing multilateralism, India’s growing reliance on the US risks undermining its credibility among developing nations. This is particularly concerning as India aims to double bilateral trade with the US to $500 billion within five years through a proposed trade agreement. Critics question whether India can simultaneously advocate for the interests of the Global South while deepening ties with a global superpower. It would be tantamount to running with hares and hunting with hounds.

Also read: By Ignoring the Mistreatment of Deportees, India Is Undermining Its Own Dignity

A bilateral free trade agreement with the US raises further questions, given the stark structural disparities between the two nations. For instance:

Population: India’s 1.4 billion people far exceed the US population of 347 million.
Income Levels: The US per capita income of $37,683 is 16 times higher than India’s $2,343.
Agriculture: Nearly 800 million Indians depend on agriculture, compared to just 25,000 heavily subsidised US farmers. The Indian peasants are small with meagre landholdings.
Workforce: India’s workforce, including both organised and unorganised sectors, stands at approximately 565 million, dwarfing the US workforce of 168 million.
Industrial structure: India’s economy relies heavily on fragmented small and medium enterprises, unlike the US’s more consolidated industrial base.

While India enjoyed a $38billion trade surplus in 2022, with bilateral trade totaling $157 billion, President Trump has made it clear that a free trade agreement would aim to reverse this imbalance. Such a deal could severely impact India’s agriculture and pharmaceutical sectors, which are vital to providing affordable medicines and sustaining livelihoods. India’s robust pharmaceutical industry, a legacy of reforms initiated by Indira Gandhi in the 1970s, has been a lifeline for affordable healthcare globally. A trade deal that undermines this sector could have far-reaching consequences.

An unequal partnership?

The joint statement issued by Trump and Modi, particularly on trade, appears heavily skewed in favor of the US. During a press conference on February 13, Trump launched a scathing critique of India’s trade policies, accusing the country of imposing “very, very high tariffs” and creating an uneven playing field. “India’s tariffs are 30, 40, 60, even 70% on many goods,” he said, adding, “We want a level playing field, which we think we’re entitled to.”

Trump also emphasised the US’s intention to sell more oil, gas and liquefied natural gas (LNG) to India, framing it as a solution to the trade deficit. “We can make up the difference easily with the sale of oil and gas,” he stated. While the two leaders announced a new energy agreement to boost US exports, critics argue that this focus on fossil fuels contradicts global efforts to combat climate change, especially after the US withdrew from the Paris Agreement in 2016.

Also read: Three Things About India that Shackled Indians Returning Home Tell Us

The 33-paragraph joint statement highlighted a bold new goal – dubbed “Mission 500” – to double bilateral trade to $500 billion by 2030. However, the rhetoric surrounding the negotiations suggests an unequal footing. Trump’s aggressive tone and Modi’s apparent acquiescence have raised concerns about India’s ability to safeguard its interests.

A threat to multilateralism?

Trump’s unilateral trade policies, including tariffs on Canadian, Mexican and Chinese goods, as well as steel and aluminum imports, have already undermined the World Trade Organisation’s (WTO) rules-based system. His administration’s disregard for multilateral trade norms signals a troubling shift toward protectionism. For India, this poses a significant challenge, especially as Trump prepares to unveil reciprocal tariffs on April 2, which could further strain bilateral relations.

Historically, trade negotiations under the General Agreement on Tariffs and Trade (GATT) and its successor, the WTO, have allowed developing countries like India to maintain higher tariffs to protect their economies. However, Trump’s accusations against India and other developing nations for building trade surpluses ignore this context. His approach risks dismantling the global trading system that has, until now, provided a framework for fairer negotiations.

A risky gamble?

India’s efforts to strengthen ties with the US under the current administration may come at a high cost. By aligning itself too closely with a protectionist and unilateralist US government, India risks not only its economic interests but also its standing as a leader of the Global South. As negotiations for a bilateral trade agreement begin, India must tread carefully to ensure that its aspirations for growth and self-reliance are not compromised in the pursuit of a lopsided partnership.

The road ahead is fraught with challenges. India’s ability to navigate this complex relationship while maintaining its strategic autonomy will determine whether it emerges as a true global leader or becomes increasingly subordinate to US interests while mortgaging India.

Ravi Kanth Devarakonda is a financial journalist based in Switzerland.

Turning Silver into Gold: India’s Aging Workforce Needs to Be Utilised

Despite a high elderly population, the concept of silver labour – continued workforce participation by older adults – remains underdeveloped in India.

India stands on the cusp of a significant demographic transition, facing a critical opportunity to leverage its aging workforce as an economic asset. As the population ages, the country faces the dual challenges of supporting its elderly citizens and managing the socio-economic impact of an aging workforce.

If managed effectively, the aging population could become a powerful economic asset through what is termed ‘silver dividend’ – the economic potential of elderly individuals in the workforce. While many discussions surrounding India’s demographic dividend have focused on its young population, the silver dividend can unlock the potential of the other half of the workforce.

The silver people

India’s demographic transition has resulted in an increasing proportion of its population entering the silver age, typically defined as individuals aged 60 or 65 years and older.

According to the last Census projections, the elderly population is expected to reach 13.1% of the country’s total population by 2031, with an annual growth rate of 3.28%, up from 8.6% in 2011. As the elderly population rapidly grows, addressing the employment and well-being of older adults has become increasingly urgent.

Several states are already experiencing a higher proportion of elderly residents compared to the national average. For instance, Kerala (12.6%), Tamil Nadu (10.4%), Andhra Pradesh (10.1%), Himachal Pradesh (10.2%), Punjab (10.3%), and Goa (11.2%) have all reported high elderly populations according to the 2011 Census.

Untapped labour

Despite a high elderly population, the concept of silver labour (continued workforce participation by older adults) remains underdeveloped in India.

According to the latest Periodic Labour Force Survey (PLFS), only 26.8% of people aged 65 and above were part of the labour force in 2023-24. It also must be noted that this rate has increased by 5.4% points when compared to the 2017-18 rate.

While life expectancy continues to rise, it is crucial to also enhance the labour force participation of the elderly.

The employment conditions for elderly workers across both rural and urban India remain challenging. However, the dynamics of labour force participation differ between rural and urban areas. The labour force participation rate (LFPR) among elderly workers in urban areas has stagnated from 2017-18 at 16% till 2023-24. In rural areas, it has gone up to 31.2% – an increase of 7.4% points when compared to 2017-18 rates.

Source: Periodic Labour Force Survey (2017-18, 2023-24), based on authors’ calculation.

A significant driver of this increase is the rising participation of elderly women in the labour market. In rural areas, the LFPR of elderly women increased substantially by 10.5% points. However, among the males, the increase happened only by 5.2% points only.

In contrast, the trends in urban areas show a decline in elderly male participation, while female participation saw a slight increase during this period.

These patterns underscore the complex and evolving nature of silver labour in India, especially as rural elderly women increasingly join the workforce.

Two elderly women at Thalsar village in Gujarat. Photo: Adam Cohn/Flickr (CC BY-NC-ND 2.0).

Choice

The increasing participation of older individuals in the labour force has a significant impact on the economy, indicating a positive trend towards realizing the silver dividend. However, it is essential to recognize that many older adults, especially those in rural and informal sectors, are compelled to continue working out of necessity rather than choice.

According to the Periodic Labour Force Survey (PLFS) 2023-24, 81% of rural elderly workers are engaged in agriculture and allied activities, compared to only 23% of urban elderly workers.

This disparity highlights that rural elderly individuals often take on precarious and low-paying jobs in agriculture, construction, or informal service sectors, driven by the need to supplement inadequate pensions or social security benefits.

For many, the absence of comprehensive financial support and rising healthcare costs make continued work an economic imperative.

Furthermore, the participation of rural elderly workers in the manufacturing and industrial sectors – which offer better growth – has remained unchanged, their involvement in the services sector has declined in 2023-24.

Breaking down their day-to-day activities further for the elderly individuals who are unemployed, the Survey reveals that they spend the maximum time on producing goods for personal use, followed by their domestic work, care, and other remaining tasks – in a day.

Notably, they spend no time on learning activities, highlighting a concerning gap in opportunities for skill development.

For those who are employed, the scenario shifts dramatically; they spend the maximum time on work-related activities. And, thus, their work appears to be more productive than their counterparts who are unemployed.

These facts underscore the urgent need to engage the elderly in both learning and employment activities, ensuring they have opportunities to develop new skills and contribute meaningfully to the economy.

An economic opportunity

India’s aging population represents both a challenge and an opportunity. By adopting comprehensive, forward-looking policies, India can transform its growing elderly population from a perceived economic burden into an asset.

Unlike the traditional demographic dividend, which focuses on the benefits of a youthful, working-age population, the silver dividend recognizes the value of older individuals’ skills, experience, and knowledge.

The retirees from the formal sector, with their experience and expertise, present a significant untapped resource. For instance, retired army officers can be engaged in roles related to security and strategic planning. To harness this potential, there is a pressing need for policymakers to develop strategies that identify and integrate retirees into appropriate sectors, ensuring their skills and knowledge are effectively utilised.

Globally, countries like Japan and those in the western world, which have substantial aging populations, are already leveraging their silver workforce. Japan has implemented Senior Human Resource Centres (SHRCs) to offer part-time and flexible work opportunities for retirees, particularly in community services, clerical work, and maintenance, alongside reemployment policies for older individuals. The United States has developed Encore Career Programs, focusing on mentorship and advisory roles for retirees. In Sweden and Germany, flexible retirement ages allow for extended working lives.

For India to reap similar benefits, it must adopt a holistic and proactive policy approach to ensure that older adults can contribute meaningfully to the economy.

Expanding social protection programs and schemes (such as Atal Pension Yojana (APY) and National Pension System (NPS), Pradhan Mantri Shram Yogi Maan-Dhan (PM-SYM), MGNREGA, Pradhan Mantri Rojgar Protsahan Yojana (PMRPY), Garib Kalyan Rojgar Abhiyaan (GKRA), promoting age-friendly workplaces, reskilling older workers, improving healthcare, and encouraging entrepreneurship are essential steps toward turning India’s aging workforce into a driver of economic growth.

Balhasan Ali is Researcher at Institute of Economic Growth, New Delhi.. Rachna Singh is a PhD Scholar from Banaras Hindu University, Varanasi. Gudakesh is an assistant professor at Institute of Economic Growth, New Delhi. The views and opinions expressed in this article are those of the authors.

New PLI Schemes Shelved After Failure to Produce Satisfactory Results: Report

Back in 2021-22, the PLI policy was launched by the government to scale up and become large enough to compete globally.

New Delhi: New production-linked incentive (PLI) schemes are unlikely to materialise, while the existing schemes are yet to produce satisfactory results.

Instead, the government is working out the contours of new incentive schemes for a cluster of industries. But these new incentives will be markedly different from PLI schemes in terms of structure and objectives, with a sharper focus on job creation and quality of products, reported The Financial Express.

“The spirit of PLI has been lost. PLI is no longer the favoured child,” an official told the newspaper on condition of anonymity.

According to the budget for financial year 2026, the new schemes are likely to be rolled out for toys and leather/footwear industries. The schemes can also involve chemicals, bicycles, shipping containers, etc., said sources.

Back in 2021-22, the PLI policy was launched by the government to scale up and become large enough to compete globally.

However, the progress of the schemes is dismal.

While Companies have invested over Rs 1.5 lakh crore in the three years through September 2024 under the 14 PLI schemes – 50% of the Rs 3 lakh crore committed over five years –only Rs 11,317 crore, or 6% of Rs 1.95 lakh crore incentives linked to investments, sales/ turnover and value addition, has been disbursed till September 2024.

Unemployment and Price Rise Biggest Failures of the Modi Government: Survey

In the ‘Mood of the Nation’ survey, 57% of the respondents said that the country’s economy is either going to get worse or remain the same in the next six months. Also, 64% of those surveyed said that they find it difficult to manage their daily expenses compared to last year.

New Delhi: A vast majority of Indians are pessimistic about joblessness in the country under PM Narendra Modi who is in his third term as the prime minister, as per the Mood of the Nation Survey of February 2025 conducted by India Today and C-Voter.

More than three-fourths of those surveyed said that the unemployment situation in the country was either very serious or somewhat serious. Only 5% thought that it was not at all serious while 55% considered it very serious and 21% see it as somewhat serious. As per the survey, 64% in the northeast and 60% in the east see the unemployment situation as very serious, compared to 48% in the south.

Jobs, jobs, jobs

Asked to identify the single biggest failure of the Modi government over the past 11 years, unemployment and price rise were chosen as the biggest one by 21% of the respondents in the Mood of the Nation Survey. In response to another question about the biggest problem India faces currently, 24% of the respondents identified unemployment and 17%, price rise and inflation.

In response to a question, 57% of the respondents said that the country’s economy is either going to get worse or remain the same in the next six months. Only 34% were hopeful of an improvement in the economy this year. 64% of those surveyed find it difficult to manage their daily expenses compared to last year and another 27% said that the expenses have gone up but are still manageable.

Graphs used by India Today to represent answers to questions on price rise, unemployment and key political issues.

Among the lower income group, 70% of the respondents that the current expenses have become difficult to manage. Among those surveyed, 82% were in favour of a universal basic income scheme, with only 14% saying no to it.

‘Pro-business’

The survey also underscored the thrust of the policies of the Modi government in favour of the big business, with 51% of those surveyed saying that big business has benefitted the most from the government’s policies since 2014. Only 9% claimed that the salaried class has benefitted while 6% identified daily wagers as the beneficiary.

Responding to another question, 65% of the respondents said that their household income or salary will either deteriorate or remain the same in the next six months. Only 27% expected it to improve during this year.

In keeping with the previous MoTN surveys, 45% of those surveyed said that the Modi government misuses central investigative agencies like the ED, CBI and the I-T department more than any other government, while 42% disagreed with the proposition. Asked if the Modi government is supporting the controversial Adani group amid allegations of bribery by a US court, 49% agreed while only 33% disagreed with the statement which echoes the attacks made by Rahul Gandhi against PM Modi.

In the survey, 47% rejected the BJP’s allegation that the Congress party is taking funds from George Soros for anti-India activities while 38% found merit in the ruling dispensation’s conspiracy theory.

It’s Time to Re-Regulate, Not De-Regulate

The ideology of privatisation and ‘de-regulation,’ emanating from the USA and ruling economics, has harmed the public good. It has resulted in inequitable and unsustainable growth.

‘Milei, Modi, Trump: an anti-red-tape revolution is underway,’ is the headline of a lead article in The Economist on February 1, 2025. Its cover announces, ‘The Revolt against Regulation’. President Milei is on a crusade to reduce the size of Argentina’s government. Milei sees his policies as not just economic reforms but a broader ideological movement against socialism. President Trump has given Elon Musk, the world’s richest man, charge of a new Department of Government Efficiency. Musk has set about his task with missionary zeal, firing employees overnight as he did when he took over Twitter, which he rebranded ominously as X.

India’s finance minister Nirmala Sitharaman declared, while presenting the national budget on February 1, that the government’s strategy for boosting economic growth is to ‘de-regulate’ the economy further. While Indian economists and corporate leaders are debating the efficacy of her proposals to reduce taxes, they endorse de-regulation as the strategy for growth. Ominously, Prime Minister Narendra Modi posted on X after meeting Elon Musk in Washington on February 13 that he had discussed “India’s efforts towards reform and furthering ‘Minimum Government, Maximum Governance’”. Does he want, like Musk does, a downsizing of government and governance of the country by the richest persons?

An ideology was indoctrinated into economic policies by the end of the 20th century: ‘private’ is good, ‘the public’ is bad. The best way to govern an economy according to this ideology is to get government out of the way and leave everything to the private sector.

Also, the government has no business to be in business, and the business of business should be only business.

According to this confused ideology, businesses can solve all social and environmental problems, provided they are not tied up by government regulation. This anti-government ideology has evolved, from Margaret Thatcher and Ronald Regan, into the extremism of Donald Trump and Elon Musk, who are shutting down government programs and firing government employees to make the world a hunting ground for real estate and technology tycoons, whose rights to hunt freely are protected by governments with the strongest armies.

It seems odd that economists continue to promote de-regulation as a strategy for growth when the need and demand for better regulation is widely evident. The 2008 global financial crisis was caused by excessive de-regulation of the US financial sector. Economists vowed to discover a ‘new normal’ for the economy. Instead, ‘too big to fail’ financial institutions were bailed out by the government, and ‘too small to survive’ citizens were left to the care of the heartless market.

The ‘Big Bang’ that China escaped

The collapse of the Soviet Union in 1991 ended the history of ideological conflict, said political scientist Francis Fukuyama. The Washington Consensus won. Democracy had beaten authoritarianism; capitalism had defeated socialism. All countries were expected to dismantle their public sectors and follow the US liberal markets ideology.

Russia was persuaded by US economists to privatise and marketise its economy with a ‘big bang’ in 1991. China resisted US pressure: it followed its own path of markets with socialist characteristics. Russia’s share of world GDP almost halved, from 3.7% in 1990 to 2% in 2017, while China’s share increased close to sixfold, from a mere 2.2% to about one-eighth of global output.

“Almost all of the post-socialist countries that applied some version of shock therapy experienced a deep and prolonged recession,” writes Isabella M. Weber in How China Escaped Shock Therapy: The Market Reform Debate (Routledge Studies on the Chinese Economy). She points out that, “Beyond the devastation documented by economic indicators (by European Bank for Reconstruction and Development, 1999; UNICEF, 2001) most measures of human well-being, such as access to education, absence of poverty, and public health collapsed”.

Weber goes on to say, “The famous Harvard development economist Dani Rodrik represents the economics profession more broadly when he answers his own question of whether ‘anyone can name the Western economists or the piece of research that played an instrumental role in China’s reforms’ by claiming that ‘economic research, at least as conventionally understood’ did not play ‘a significant role’ (Rodrik, 2010)”.

India’s leaders should rethink the country’s strategy for growth. India’s economic planners are calculating the growth of GDP necessary for India to rise further up global GDP rankings. Presently India, with $3.6 trillion GDP, ranks fifth. Its leaders aim to grow the economy to $26 trillion, to third place behind the US and China. To achieve this, growth must increase from the present 6.8/7% to 8.1% for the next 25 years.

The problem of economic growth is complex. Not only must the rate of GDP growth be faster. But it should be more inclusive too, and environmentally sustainable. India’s pattern of growth since the liberalization of its economy has not been as inclusive as China’s and Vietnam’s.

See table 1: Pace of inclusion in economic growth

	India	China	Vietnam
GDP per capita, 1989	$330	$314	$98
GDP per capita, 2023	$2400	$12700	$4350
Number of times per capita GDP increased between 1989 and 2023	7.3	40.4	44.4

India is the most densely populated, large country in the world. India has an acute problem of ensuring that economic growth does not come at the cost of further damage to India’s natural environment.

See table 2: Environmental sustainability: Footprints on the earth countries with over 250 million population

	Population (million)	Footprint (pop/sq.km)	Renewable Water Resources (cu.m/per capita/per yr)
India	1450	430	1450
China	1410	150	2000
USA	330	36	8800
Indonesia	278	151	8000

The US is the richest country in the world and has ample environmental resources. The US economy has grown without care for the sustainability of its natural resources. India must not follow the US’s technology-and-capital’ driven growth model growth any longer, which will harm India’s over-strained natural resources further. India must return to a more ‘natural’ model. Moreover, the US capitalist model is not designed for inclusive growth, unlike the socialist development models of China and Vietnam.

A conflict between capitalism and democracy

When the Soviet Union collapsed in 1991, political scientist Francis Fukuyama prematurely declared the ‘end of history’. He believed that capitalism and democracy – the Washington Consensus – had finally prevailed over socialism and totalitarianism.

History has returned. Ideological conflict between democracy and capitalism has not ended. In fact, the two ideologies are conflicting within the Western victors of the old Cold War. Civil society movements are speaking in the West on behalf of people left behind by the “free market” of private enterprise. Other voices on “the Left” demand a larger role for governments in providing public services and social security. And others speak for protection of the natural environment. Meanwhile the Right advocates for lower taxes, less regulation, and more freedom for capital to roam the world.

The fundamental conflict between the core principles of capitalism and democracy – i.e., between the rights of owners of capital on one hand, and the rights of all humans on the other – continues. It is a conflict between political conservatives and political progressives. Between conservatives, who want to retain their power to fix the rules of the game from which they have benefitted, and progressives who want to change the rules for the benefit of those left behind.

Democracy and capitalism are founded on different conceptions of fundamental rights. Capitalism’s foundation is property rights. Democracy’s is human rights. Capitalist institutions run on the principle that whosoever owns something has the right to use it as he wishes, and that whosoever owns more of a shared resource must have a greater say in how that resource is used. Therefore, whoever owns more shares in a corporation has a larger vote than those who own fewer shares.

On the other hand, ownership of property does not matter while assigning voting rights in democratic institutions. Because, in democracy, every living person, whether she has a billion dollars of wealth, or no dollars at all, has an equal vote in the governance of the collective human enterprise.

The clash between capitalism and democracy is a clash of fundamental principles for good governance of societies. When appliances designed to run on AC power are plugged into sockets providing DC power, there will be blow-outs. Similarly, when institutions of capitalism and democracy designed to run on fundamentally different principles are plugged into each other, something will blow up.

Re-regulate, not de-regulate

“Done right, deregulation could kick start economic growth”, recommends The Economist on February 1, 2025.

An economy is a complex system, embedded within a more complex, social system, which is embedded in a wider, complex, natural system. The economy depends for its sustenance on the social and environmental systems around it. Economists model economic systems as internally self-regulating markets (by an ‘invisible hand’) which use human communities and the natural environment as resources for their growth. In their models, impacts of growth of the economy on society and the natural environment are ‘externalities’.

Complex systems take many forms. Complex machines, like airplanes, are complex systems composed of many complex sub-systems – mechanical, electrical, hydraulic, and electronic – which must work harmoniously. Designers of airplanes must ensure compatibility amongst the sub-systems to enable an airplane to fly. Modern airplanes are equipped by their designers with internal, self-governing mechanisms to regulate the interactions amongst an airplane’s internal systems, thus enabling it fly on auto pilot.

Biological systems, such as human and animal bodies, are also complex systems with internal self-governing mechanisms. The difference between complex machines and complex natural systems is that complex machines designed by experts, is that machines cannot evolve by themselves into new forms to fit changing environments, whereas natural systems can. Machines are complex rigid systems; natural systems are complex adaptive systems.

Human societies are adaptive systems too, but they are even more complex. They have the capability to self-intentionally adapt. Humans invent institutions to regulate their collective behaviour. Humans can reform the institutions they have invented when they are no longer fit for purpose. This has hazards, however. With their hubris to control the world around themselves, and by using the wrong model of the complex system they want to control, they can harm the system’s self-sustaining ability.

Systems’ science explains the distinctive architecture of the different varieties of complex systems that enable them to function effectively and sustain themselves. All systems need stability to survive. The architectures of natural and human systems have features that provide stability and also enable them to change themselves over time to fit their changing environments. One of these features is an ‘economy of rules’.

Systems need rules to govern themselves. Systems’ studies reveal that while “no rules” is not an option (it will lead to chaotic behaviour), too many rules slow down the adaptability of the system. Self-intentionally adaptive systems, which human societies are, can apply too many rules to govern themselves, thus harming, rather than improving their performance. When they add a good new rule, they must learn to let go of an old rule which will not be as useful any longer, thus always applying only a minimal set of critical rules. Regulation of a system is a process of learning and discovering the best, minimal set, of critical rules for the regulation of the system’s behaviour.

The right process will produce the right reforms

No regulation is not an option for governance of complex systems. And bad regulations can cause harm. How can regulation be done right?

The Indian government is unable to find solutions for common people’s difficulties in earning decent incomes with dignity. The people have lost trust in the government’s ability to listen to them. BJP governments have been unable to make “pro-market” reforms in India to open labour, energy, and agricultural markets since 2014; even in 2019 with a large majority in the parliament. Agriculture reforms were withdrawn when farmers protested that they were not consulted; the farmers were shut out and camped on highways around the capital for months. The new labour codes cannot be implemented because unions say they were not consulted adequately.

Economic science is in a rut. For supporters of free markets trouble in an economy is a sign it has not ‘reformed’ enough. It was too socialist. Its’ government did not get out of the way of the private sector sufficiently; its’ government continued to nurture domestic industries and employment; it continued to deliver services to needy citizens rather than handing them over to the private sector. The harm IMF’s structural reforms have caused are visible in many countries. Very few governments have openly resisted. A socialist government elected in Greece after the 2008 financial crisis was beaten into submission by the IMF and European Central Bank and it fell.

The IMF has now examined why many governments have been forced to dilute IMF-backed structural reforms and even backtrack, in the IMF World Economic Outlook Report (October 2024). It concludes that stakeholders are not consulted sufficiently before policies are designed because experts think that common people do not understand their own problems as well as experts do. Consultations if any are pro forma and insincere. Unsurprisingly, the reforms are resisted when they are imposed on the people. The shortcomings of the reforms could have been avoided if policymakers were willing to listen to the perspectives of all stakeholders, especially those most affected by them.

Experts complain that the problem of reforms is that governments are unable to implement the good reforms designed by the experts. Whereas the problem is that they are not consulting all stakeholders before they design the reforms. If they listened to all stakeholders, they would see the contours of the system from many perspectives and understand the system better than data-based models which exclude forces in the system that experts cannot measure quantitatively. With adequate and sincere consultation, policy reformers can design better reforms. Also, all stakeholders will cooperate in the implementation of reforms if they are included in the process of reform and reforms are not forced on them.

Arun Maira is a former member of the Planning Commission and former Chairman, BCG India.

How Should India Respond to the Trump Tariff War?

The Trump-led global tariff war is changing the dynamics of global trade. It is expected that this will give impetus to the regionalised nature of international trade and inter-regional trade agreements.

As Donald Trump returned to the White House, the landscape of the global trading system became more complex. Trump fired its first round of tariff bullets on its major trading partners including Canada, Mexico and China. The next set of target countries are the European Union, Vietnam, and India which may face the brunt of Trump tariff war. The evolving trade policy stance of United States provides enough signals to its trading partners to diversify their trade from the US market. Shifting trade supply chains is not easy in the world of global value chains, where inputs are sourced globally and traverse multiple borders before reaching the final market. This becomes more difficult due to the sheer size of the US economy and its presence in global supply chains.

On February 13, the White House issued a Memorandum for the Secretary of the Treasury and other relevant departments titled “Reciprocal Trade and Tariffs”. The Memorandum states that the United States intends to follow a customised approach for each foreign trading partner based on five different areas: tariffs imposed on United States products, unfair and discriminatory taxes, costs to United States’ business and consumers stemming from disguised trade barriers, manipulation of exchange rates, and any other unfair trade practices.

Under the Trump America First Trade Policy, the challenges for India are manifold in a highly complex and uncertain global trading environment. It is important to see how India’s trade policymakers respond to the Trump Tariff War in the dilemma of opening markets and protecting its domestic political imperatives. Amid these challenges, it is imperative for India to adopt a calibrated approach to secure a deal with Trump and mitigate the potential risk of a full-blown tariff war.

‘Unfair’

First, the United States has expressed concerns regarding “unfair trade practices” amounting to a trade deficit of US$ 45.6 billion in favour of India. This clearly demonstrates that tariff cuts are the top priority of the United States in enhancing its market access. India has already taken a few steps in this direction, but it still needs to do more to calm Trump.

India needs to put more effort into simplifying its complex and multi-tiered tariff structure which keeps changing every year. The rationalisation of the import tariff structure will certainly signal that India is undertaking serious reforms in its trade policy framework. Moreover, it will also help the country address issues related to the “inverted duty structure”.

Deficit

Second, India can identify specific tariff lines in which the United States can replace China in the Indian market, though this will not be so easy, given their varying export profiles. But there exists some scope for capital goods and other product categories. Such product categories need to be identified, and possible options should be explored to increase imports from the United States. This will not only help India to reduce its trade deficit with China but will also strengthen India-United States ties in containing China’s trade dominance.

Furthermore, India can increase its imports of defence, oil, and gas from the United States. This holds promise as a way to address the United States’ concerns regarding increasing trade deficits.

Labour

Third, India’s trade policymakers should aim to secure better market access for labour-intensive exports. Trump had withdrawn the benefits of the Generalised System of Preference (GSP) in 2019, which has been hurting our exports to the US market. India should ask for it to be restored if a comprehensive reciprocal tariff arrangement is being worked out. This will help India regain its lost market access in some product categories such as articles made of leather, rubber products, toys, garments and pharmaceuticals. Enhanced market access will not only boost exports, but will also contribute employment generation in the manufacturing sector.

Sector

Fourth, some policy experts contend that India should not explore possible options for a “sectoral trade agreement”. It is important to understand that a sectoral trade agreement with the United States will not be of interest to India, given that it maintains high tariff rates. Any tariff cut under a sectoral FTA based on the United States’ policy of reciprocity of trade and tariffs will benefit the US at the cost of Indian industry. Reciprocity tariff reduction in a sectoral agreement involve offering equal tariff cuts across tariff lines under negotiation. This could be more challenging for India. A selective approach to tariff reductions under bilateral trade talks seem to be the best option for India.

World

Finally, the Trump-led global tariff war is changing the dynamics of global trade. It is expected that this will give impetus to the regionalised nature of international trade and inter-regional trade agreements. Mega regional trade agreements such as the Regional Comprehensive Economic Partnership (RCEP) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will further focus on reorganisation of supply chain networks within regional blocs. The EU has recently finalised a trade agreement with Mercosur (Brazil, Argentina, Uruguay, and Paraguay) to promote trade and investment. It is clear that the Trump America First Trade Policy will compel its trading partners to focus on regional and bilateral trade. Therefore, it is crucial for India to conclude its bilateral trade agreements with the EU, UK, Australia, Canada, and Latin American economies to protect its economic and trade interests.

Surendar Singh is an associate professor at the Jindal School of Liberal Arts and Humanities, OP Jindal University, Sonipat. Views are personal.

This piece was first published on The India Cable – a premium newsletter from The Wire & Galileo Ideas – and has been updated and republished here. To subscribe to The India Cable, click here.