India will need to brace for challenges ahead, especially in dealing with non-tariff barriers and potential duty measures that may arise in the future.
This comes as several global economic powers, including the United States and the European Union, increasingly implement policies aimed at protecting their domestic industries.
These measures could have significant implications for India’s trade, as it relies heavily on exports and global markets for its economic growth.
Santosh Kumar Sarangi, the Director General of Foreign Trade (DGFT), highlighted the evolving nature of global trade policies during his address at the Confederation of Indian Industry’s (CII) Export Competitiveness Conclave.
Sarangi discussed how developed economies, such as the US and the EU, are using non-tariff and unilateral duty measures to boost their manufacturing sectors.
These measures include the Inflation Reduction Act and the CHIPS Act in the United States, as well as the Carbon Border Adjustment Mechanism (CBAM) in the European Union.
Sarangi also mentioned deforestation regulations as another potential non-tariff barrier that could affect goods coming from developing economies like India.
These steps by the US and the EU are clearly designed to support their domestic industries, but they may pose challenges for emerging economies such as India. As Sarangi pointed out, both tariff and non-tariff barriers are a clear violation of World Trade Organisation (WTO) commitments.
This will be something that India will have to manage carefully in the years to come, as it could affect the country’s trade relations and exports.
In particular, the EU’s Carbon Border Adjustment Mechanism is an example of how non-tariff measures can be used to put pressure on countries with weaker environmental regulations.
This could potentially affect Indian exports, as the EU intends to impose taxes on goods that do not meet certain environmental standards. India will need to ensure that its industries remain competitive while also adapting to the shifting global policies that prioritise environmental standards.
Similarly, the US has been actively pursuing measures like the Inflation Reduction Act and CHIPS Act, aimed at boosting domestic production, particularly in industries like renewable energy and semiconductor manufacturing.
While these measures may not directly target India’s key exports, the shifting trade dynamics could have indirect consequences, especially for industries that rely on the US as a key market.
Sarangi also touched on the recent rhetoric surrounding the potential for higher tariffs, particularly from the US under the leadership of President-elect Donald Trump.
Although it remains unclear how exactly these new duties may be structured, Sarangi noted that the rhetoric emphasises the need for reciprocity in trade deals.
If the US decides to impose higher duties, it could complicate trade relationships, especially in sectors where India faces high tariffs, such as agriculture.
However, Sarangi pointed out that India does not rely heavily on agricultural exports to the US, so any impact would likely be limited to specific products rather than large-scale harm to the economy.
The challenge for India will be to stay nimble in navigating these complex trade dynamics. India’s export competitiveness depends on its ability to adapt to changes in the global economic environment, including trade barriers, tariffs, and regulatory requirements.
Sarangi’s comments underscore the importance of being prepared for these challenges and ensuring that India’s industries remain resilient in the face of growing protectionist tendencies around the world.
For now, it is difficult to predict the exact consequences of these measures, as they will depend on the finer details of future agreements and policies.
However, Sarangi’s cautionary remarks serve as a reminder that India must be proactive in preparing for a future where trade dynamics could shift dramatically, impacting its export potential.
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