Tackling Tariff Hurdle Amid 50 per cent Tariff Imposed on India

India must explore all possible avenues to sustain its current economic momentum without pressing the panic button. Policy makers should not be perturbed by the fluctuating stock market or engage themselves in speculations about possible devaluation of the Indian rupee in the wake of the 50 per cent tariff imposed by the United States (US). Instead, the country should focus on its strength and resilience to face the challenge posed by the Trump administration. India should address all the grey areas carefully and take proper remedial measures in consultation with the stakeholders, as abnormal and unilateral tariff hike can affect the Indian economy badly but it may also prove to be a blessing in disguise if proper and timely steps are taken.

Before proceeding further, let us examine the possible impact of the US tariff on the Indian economy. At the outset, it should be mentioned that the volume of Indian export to the US stands at nearly $ 8000 crore. Thus, the impact of high tariffs will be mostly felt by manufacturers -- major exporters -- who will have to find new markets to keep their ventures viable. Secondly, the hike will make the dollar costlier against the rupee, which means a rise in India’s import bill that may negate the country’s advantage of purchasing oil at a cheaper price from Russia. This development may affect GDP growth rate as the import will become costlier, while export will have to suffer till alternative markets are found. With the contraction of the US market, there are apprehensions that people employed in export-oriented sectors may lose their jobs, which will put an extra burden on the Indian economy.

It's a challenge to navigate the Indian economy from this crisis. The task may sound difficult but not impossible to achieve as the Indian economy now stands on a firm foundation. It goes to the credit of the Indian economy that irrespective of the global uncertainties, the country has registered over seven per cent growth in the first quarter of the ongoing fiscal. Secondly, a good monsoon will provide a much-needed fillip to the Indian economy by strengthening the rural economy. Thirdly, reduction of GST rates will also help increase domestic demand which may help indigenous industries. Buoyed by the government’s decision to reduce taxes on several goods, car manufacturers have also sought lower GST rate for their products as they believe that car sales will be maximum during this festive season, provided the taxes are lowered. At the same time, reforms already initiated in personal tax (income tax) through this year’s budget may also result in more savings by common people. The vast domestic market and new markets should help India overcome the current tariff obstacle.