India may reconsider protectionist trade policies due to tariffs

India may be at a crucial moment in its economic journey, similar to the reforms of 1991. As trade tensions rise due to U.S. tariffs, some experts believe India has an opportunity to move away from protectionism and further open its economy. India has some of the highest import tariffs in the world, averaging 12%. This is significantly higher than the U.S. (2.2%), China (3%), and Japan (1.7%). High tariffs can increase costs for Indian companies that rely on global supply chains and lead to higher prices for consumers. Despite some growth in exports, India runs a significant trade deficit, with only a 1.5% share of global exports. The Modi government is under pressure to relax its trade policies. Recently, India lowered tariffs on U.S. products like whiskey and motorcycles, and officials are in talks with the U.S. about a potential trade deal. Experts warn that further increases in tariffs could be harmful. With a smaller share of global exports, India is more vulnerable in a trade conflict than larger economies like China. Some believe that reducing tariffs could help India attract investment and create jobs in manufacturing, which is crucial for its large, unskilled labor force. There are concerns about potential dumping, where foreign companies might sell cheap goods in India, harming local industries. Experts suggest that India should reduce its tariffs universally but maintain some protections against specific cases of dumping. While there are risks, economists believe that the current situation might prompt India to pursue necessary reforms. However, they caution that India should not soften its trade policies too much to appease the U.S. and should focus on strengthening its bargaining power. If India can successfully navigate this situation, it could emerge as a key player in global trade.