Indian Trade Secretary Sunil Barthwal said on Tuesday that his government has “decided to go for a path of trade liberalization with the United States.”
“There are both concerns and opportunities for India in terms of the current tariffs, but India has already taken a path where we will be going for trade liberalization with the U.S.,” Barthwal said.
The Indian trade ministry said long-distance talks for a trade deal will begin in April followed by a round of in-person discussions in May.
Barthwal said U.S. and Indian representatives signed “terms of reference” on Tuesday to arrange future talks on the bilateral trade agreement that has been taking shape since President Donald Trump met with Indian Prime Minister Narendra Modi in February.
Indian and U.S. officials said negotiations were on track to complete the first phase of the trade deal by October of this year. Barthwal said it would be “even better for both nations” if the talks could be completed sooner.
NDTV predicted Modi’s team is “unlikely to agree to a zero-for-zero tariff strategy with Washington” instead preferring a “broad package deal on tariffs and non-tariff barriers.”
The problem with zero tariffs from India’s perspective is that it has much lower per capita income than the United States, so it needs some tariffs to compensate for the lower buying power of its consumers.
Some Indian analysts have suggested proposing zero duties on some American imports in exchange for zero tariffs on particular Indian goods. For example, India would like lower U.S. tariffs on its labor-intensive products, such as textiles and chemicals, while the U.S. wants lower tariffs on its exports of industrial products, automobiles, and farm goods.
“India is far ahead of other countries in negotiating a trade deal,” an Indian official assured NDTV.
India’s early trade overtures to Trump included offers to buy more American oil and military equipment, a path Trump said could lead to India becoming the first non-NATO member to acquire the F-35 fighter jet.
Trump has spoken rather harshly of India as a “tariff abuser” and the “tariff king,” criticism New Delhi has mostly taken in stride while relying on the friendship between Modi and Trump to keep negotiations rolling.
India has also looked on the bright side by musing that Trump’s tariff carpet-bombing of China could create “the opportunity of a lifetime” for Indian industries. Both American and Indian officials pronounce themselves satisfied with the pace of trade negotiations every time reporters ask.
The New York Times (NYT) on Tuesday thought Indian officials might be a little too chipper about the opportunity presented by Trump’s tariffs to gain an advantage against China, because India is not ready to take full advantage of that opportunity.
India’s economy, while growing fast, is still one-fifth the size of China’s, its infrastructure lags behind, it does not have enough skilled workers, and the size of India’s manufacturing sector is actually shrinking relative to services and agriculture despite Modi’s enthusiastic efforts to turn his country into a manufacturing powerhouse.
Anil Bhardwaj, secretary-general of an Indian manufacturing association, made the interesting observation that India’s court justice system needs to improve before manufacturing can reach the next level. His point was that India’s courts tend to be slow and arbitrary, so small companies are afraid to grow and potentially attract hostile attention from larger corporations.
“Any entanglement can turn deadly for a smaller player, so they avoid growing, and miss out on efficiencies of scale,” the NYT summarized.
India does have some manufacturing victories to tout, including a remarkably productive group of companies making Apple smartphones. The Tamil Nadu region of India now produces almost 20 percent of the world’s iPhones, and Indian analysts think they could bring that up to 30 percent fairly quickly.
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