Impact of US Tariffs and Challenges in Indian Manufacturing

US Tariffs and Global Impact

The introduction of the US President Donald Trump's "Liberation Day" tariffs is poised to impact not only the US economy but also economies globally, including India, Canada, Brazil, Mexico, and China. Although the full effects may take a year or more to manifest, consensus suggests negative repercussions in both the short and long term.

• Countries excluded from the US market will seek alternative markets, affecting global trade dynamics.
• Responses from different countries vary, with some opting for counter-tariffs and others, like India, pursuing negotiations and tariff reductions.
• Trump aims to strengthen the US industrial base, though his methods are controversial.

Global Manufacturing Competitiveness

Trump's tariffs serve as a catalyst for countries to reassess their manufacturing competitiveness, particularly in a global context dominated by China's efficiency and India's struggles to gain traction.

• India's manufacturing sector has failed to achieve global competitiveness despite initiatives like the National Manufacturing Policy (NMP), Make in India, and Atmanirbharta.
• Manufacturing's contribution to India's GDP is stagnant at 13-14%, with goods exports under 2% of global exports.

Challenges in Indian Manufacturing

India's manufacturing sector faces numerous obstacles that hinder its global competitiveness, despite having a large workforce and market potential.

• Business houses lack scale and global ambitions, and are slow to adopt new technologies.
• Many focus on the domestic market rather than expanding internationally, leading to limited global presence.

Governmental Role and Sectoral Focus

The Indian government, at both the Union and state levels, bears significant responsibility for the manufacturing sector's challenges.

• Manufacturing in India is burdened by obstacles like land acquisition, high electricity costs, and slow clearance processes.
• Regulations favor established domestic firms, creating a difficult environment for global and new domestic manufacturers.
• There is a lack of focus on specific sectors where India could excel, such as pharmaceuticals and automobiles, which previously showed promise but now exhibit stagnation.

Conclusion

Collaborative efforts by the Union and state governments are vital to address these systemic problems and propel India towards becoming an economic powerhouse. The author of this analysis is a former business editor, offering personal insights independent of Business Standard's opinions.