Kamal Ghorui
Deal with Trump signals fundamental shift in India’s trade philosophy from ‘won’t buy’ to ‘will sell’
America matters, for it’s where the most money is. This year, Americans will buy clothes worth $370bn – more than the value of all cars sold in India. As of 2023, India’s share of this ginormous apparel market was only 5.8%, up from 4% in 2013, even though China’s share plummeted from 38% to 21% in that period. Who walked away with the market? Vietnam, although US International Trade Commission considers “quality and detailed finishing” as India’s strengths. What held us back then? Costs, mainly. Not because our labour is costly, but when we tariff, say, imported cotton, to shield our farmers, the T-shirts we export aren’t as cheap as they could be.
That’s why India’s string of free-trade deals over the past two years – UAE, Australia, EFTA, UK, NZ, and now EU and US – could be transformative. For the first time since 1947, India is building its trade policy on confidence, not fear. All these FTAs, especially the biggest ones with EU and Trump, show a fundamental shift in thinking, from “we won’t buy” to “we will sell, whatever it takes”. With Trump, that has meant stopping purchase of cheap Russian oil. And from purely cold market logic, it’s the right thing to do. How can saving $2 on a $60 barrel be worth getting locked out of a $30tn market that gobbles not only shirts but also coffee, auto parts, shoes, furniture and so much more, including phones. Besides, Trump is clearly open to doing business with Putin. If the Ukraine war stops by June, which seems to be his new deadline, we can have our fill of Urals again.
Talking of phones, India’s exports touched $50bn last year thanks to low or no trade barriers. Could our phone industry have scaled up so fast with hefty duties on imported phone components? That’s why, Trump or not, India should integrate rapidly with global manufacturing. It’s unfair and unwise for a country with 18% of world population to have less than 2% share in global merchandise trade, when China with the same population is at 20%. Frankly, China got ahead of India by becoming the world’s factory. And if India wants to lift its millions to a higher living standard, it will have to draw them away from farming for themselves to manufacturing for the world. But it can’t if it perpetuates the status quo with farm tariffs. No other major economy has half its population engaged in agriculture – just 1.2% in America. While farmers’ nervousness about the US deal is understandable, govt should help them through the transition rather than delay the inevitable.
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