Can India balance tariffs, trade tensions, and economic growth with the US? Here’s how it’s navigating the challenges
India is carefully balancing its trade relationship with the US, facing challenges like tariffs, trade barriers, and economic priorities. As the world’s fifth-largest economy, India aims to protect its industries while staying a key global trade partner.
The GSP Revocation: A Major Setback
In 2019, the US revoked India’s preferential trade status under the Generalized System of Preferences (GSP). This move hit Indian exporters hard, especially in sectors like pharmaceuticals, textiles, and chemicals. As a result, India imposed retaliatory tariffs on US goods like almonds and apples, creating a tense trade environment.
Digital Services Tax: A New Flashpoint
India’s digital services tax (DST) on foreign tech companies like Google and Amazon has added to the tension. The US calls it discriminatory and threatens retaliatory tariffs. However, India argues it’s a fair way to ensure foreign firms pay taxes where they operate.
Impact on Businesses and Consumers
For Indian exporters, higher US tariffs mean reduced competitiveness. Meanwhile, American companies struggle to enter India’s protected markets. This also affects consumers, who may face higher prices for imported goods like electronics and medical devices.
Hope for Resolution: Trade Policy Forum
Despite the challenges, both countries are working to resolve issues. The recent restart of the Trade Policy Forum (TPF) after four years is a positive step. These talks could address market access, intellectual property, and trade barriers.
Also Read: How a India-US Trade Deal Can Reshape the Global Economy
What India Can Do Next
To strengthen its position, India must simplify regulations, reduce bureaucracy, and invest in infrastructure. By fostering innovation and attracting foreign investment, India can boost its global trade standing while protecting its economy.
A Delicate Balancing Act
India’s trade relationship with the US is a tightrope walk. While challenges remain, dialogue and policy improvements offer hope for a stronger, more resilient economy.
FAQs
Q: What is the Generalized System of Preferences (GSP)?
A: The GSP is a program that allows developing countries to export goods to the US duty-free or at reduced rates. India was a major beneficiary until the US revoked its status in 2019.
Q: How have US tariffs impacted Indian industries?
A: US tariffs have made Indian goods less competitive in the American market, particularly affecting sectors like pharmaceuticals, textiles, and chemicals.
Q: What is the digital services tax (DST), and why is it controversial?
A: The DST is a tax on foreign companies offering digital services in India. The US sees it as unfair, while India argues it ensures foreign firms pay taxes where they operate.
Q: What steps is India taking to resolve trade tensions with the US?
A: India is engaging in talks through the Trade Policy Forum (TPF) to address issues like market access and trade barriers. It’s also improving domestic policies to support exporters and attract investment.
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