A Wake-up Call to Recalibrate India’s Trade Geography, says Dinesh Kanabar

IN THE HIGH-STAKES world of global trade, hope is never a strategy. Over the past few months, India has found itself at the receiving end of punitive U.S. tariffs — first a 25% levy, among the steepest in the region, and then another 25% linked to its purchase of Russian oil. For exporters of gems and jewellery, textiles, and other sectors whose most profitable market is the U.S., this is not just a squeeze on margins but a potential existential challenge. The numbers are sobering. The consensus among economists is that these tariffs could shave off between 0.75% and 1% from India’s GDP growth. For an economy already performing below its potential — growing at 6-7% when most agree it could sustainably clock 9-10% — this shock could not have come at a worse time. But, within every crisis lies a catalyst. The tariff blow is a reminder that India cannot afford to rely excessively on one market, or one set of relationships or reforms. An immediate cushion The Centre’s swift move to rationalise GST rates has been the first, and arguably the most significant, response. While long in the making, the timing is fortuitous. The lowering of the indirect tax burden stimulates domestic consumption and simplifies compliance, reducing the friction that has long dogged entrepreneurs. However, GST alone cannot neutralise the tariff shock. It buys breathing space, but the larger question remains: how can India convert this external adversity into an internal reform momentum? Structural roadblocks The real bottleneck lies not in tariffs but in India’s economic plumbing. The following factors need immediate attention: Ease of doing business: Despite improvements in global rankings, Indian businesses continue to face bureaucratic entanglements. What is marketed as “single window” clearance, too, often morphs into a labyrinth of approvals. Entrepreneurs spend more time navigating paperwork than building companies. Tax uncertainty: The tax regime remains plagued by disputes that drag on for 15–20 years. While GST addresses a part of this, the broader framework for quick, fair resolution of disputes is still amiss. Litigation that outlives business cycles is a recipe for stagnation. Legal simplification: Complex, ambiguous laws are a breeding ground for bureaucratic discretion. For India to unlock its potential, it must not only legislate more simply but also administer laws with a lighter, more enabling touch. Unless these roadblocks are dismantled, India will remain vulnerable — not just to tariffs from Washington but to every external shock that tests the resilience of its economy. Looking beyond the U.S. The tariff dispute is a wake-up call to recalibrate India’s trade geography. Even as one hopes that statements of conciliation from Prime Minister Narendra Modi and U.S. President Donald Trump signal a softening of positions, India cannot afford to let its prosperity hinge on access to one market. The opportunities are manifold: Europe: Despite its own challenges, Europe remains a lucrative, diversified market where Indian exporters can strengthen their foothold. Africa: With its young population and fast-growing economies, Africa is not just a resource hub but a future consumer powerhouse. Southeast Asia and Latin America: Both regions are underpenetrated by Indian exporters but represent large demand pools for textiles, pharmaceuticals, and technology services. At the same time, businesses must explore value-chain adjustments: establishing partial operations in countries with lower tariff barriers, adding value in export destinations, and building supply chains that are less vulnerable to geopolitical frictions. Strategic self-reliance The U.S. tariff action also underscores the wisdom of India’s policy of multi-alignment. Diversification is a diplomatic and economic necessity. Two imperatives stand out: Technology leadership: To truly be resilient, India must position itself at the frontier of technological innovation. Dependency on external players — whether for semiconductors, AI or renewable energy — creates vulnerabilities that tariffs can easily exploit. Defence and self-sufficiency: In import-reliant sectors such as defence, self-reliance is not just about pride but about economic security. Initiatives like ‘Make in India’ and ‘Aatmanirbhar Bharat’ are not slogans; they are strategies of survival in a world where alliances can shift overnight. From reaction to reinvention The tariffs war is painful, but it is also clarifying. It reminds India of three realities: External goodwill is transient: Markets and leaders change, but India’s destiny must not swing with the pendulum of foreign policy. Structural reform is urgent: Unless India clears its own internal hurdles — bureaucracy, litigation, and uncertainty — it will never convert potential into performance. Resilience lies in diversity: Markets, partnerships, and technologies — all must be plural, not singular. As India navigates this storm, it has two choices. It can hunker down, treat tariffs as an external misfortune, and wait for negotiations to ease the pain, or it can treat this moment as a wake-up call, using it to fast-track reforms, reimagine trade partnerships, and reinforce self-reliance. India’s growth story has always been punctuated by external shocks — the oil crises of the 1970s, the balance-of-payments crisis of 1991, and the global financial crisis of 2008. Each created the conditions for India to adapt and grow stronger. The tariff row is no different. The pain is real, but the lesson is larger: resilience is built not by avoiding shocks but by reforming in their aftermath. If India uses this moment to simplify its laws, strengthen domestic consumption, diversify trade, and build technological self-reliance, then what looks like a tariff war today could, in hindsight, be remembered as the inflection point that propelled India towards its long-deferred destiny of sustained, double-digit growth. (The author is CEO, Dhruva Advisors LLP. Views are personal.) Fortune India is now on WhatsApp! Get the latest updates from the world of business and economy delivered straight to your phone. Subscribe now.

A Wake-up Call to Recalibrate India’s Trade Geography, says Dinesh Kanabar

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