The US has slapped a crushing 50% tariff
on some Indian goods. The higher tariffs
took effect earlier this hour, doubling
the existing 25% duty that was
implemented on August the 7th. For more,
let's bring in our India trade and
economy reporter Shrii Shivasta Sabah in
New Delhi. Uh Shri, maybe let's just
start with uh and first of all, this is
a really high level of tariffs. It's
50%. What sort of an impact is this
going to have on the Indian economy? How
punitive is it going to be?
Definitely as you said this is the this
is punishingly high for India. It's the
highest among Asian economies and it has
it's going to play out differently for
different different sectors. So first of
all you know US is the largest market
export market for India. It's the
biggest trading partner with India and
uh Indian exporters uh sold some $87
million goods to the US market last
year. That's 2% of India's GDP. So
definitely you know uh such high tariffs
of course it shut shuts down the market
for Indian exporters. Now they will have
to look for other ways other markets
newer markets to diversify. So of course
that is going to be a huge impact.
Secondly it also uh you know impacts
some some of the labor intensive sectors
which provide uh you know a huge number
of jobs in India.
sectors like footwear and leather, gems
and jewelry, textiles, these are all
labor intensive sectors and with such
high tariffs, you know, uh exporters are
already seeing buyers putting orders on
hold. So we are going to see there's a
risk of unemployment in the next few
months if the situation is not resolved.
It also thwarts India's ambition of
becoming a manufacturing powerhouse. You
know, Modi has been trying to attract
manufacturing for investors who are
looking to diversify. So it impacts that
uh plan as well. But secondly, we should
also keep in mind that India is not not
an export-driven economy. It's a
consumption led economy. Some 60% of
India's GDP is driven by consumption. So
I think some of the economic pain which
India is likely to fe face in the months
to come that can be mitigated by the
fact that the government is trying to
boost consumption. uh the government has
recently pledged to cut consumption t
taxes and that should you know lift
spending in India and uh probably shield
some of the pain that the nation is
going to feel.
Yeah. So ultimately uh the Indian
economy is still driven a lot by
domestic demand as opposed to exports
but there's still be there still will be
an economic hit. What about the the
politics of all of this? What does this
do to the India US relationship?
Definitely this is going to have a you
know far-reaching impact on the
strategic relation between India and the
US. India was one of the first countries
to start trade negotiations with the US
when Modi visited uh Trump in White
House in February. However, despite
months of negotiations, the two sides
have not been able to secure a trade
deal. Now, and Trump has repeatedly
blasted India for its continued purchase
of Russian oil. These punishingly high
tariffs are supposedly for the continued
purchase of Russian oil. So this is
going to have an impact on India's
bilateral relationship with the US. We
are already seeing that that's already
starting to play out as we can see. Uh
it is bringing uh India closer to its uh
fellow members in the BRICS block. uh
after 7 years and you know after the
violent border clashes in 2020 uh China
and India have try are trying to patch
up their ties which plummeted.
Uh Modi is expected to meet Xi Jinping
next week uh on the sidelines of a
security summit and India and Russia
have pledged to uh increase their trade
over the next 5 years. So we see that uh
the that the yeah India is edging away
from the US and moving closer to the
bricks block.
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