Albert Park, chief economist at the Asian Development Bank , is in India and sat down with TOI to speak on a range of issues from India’s growth to impact of Trump tariffs . Excerpts:
How do you look at India against the backdrop of what’s happening geopolitically, especially the Trump tariffs?
We’ve downgraded our forecast compared to April. India is now facing one of the highest tariff rates, 50%. Thankfully, services exports are not being targeted by the Trump regime, which is important for India. Exports going to the US that are subject to the 50% tariff are around 1.2% of India’s GDP. It’s not going to have a major effect on growth, which is why our downgrades are fairly modest.
Our growth forecast for India is still quite robust, 6.5%. It’s the second highest growth for all countries in Asia. That reflects a lot of good things that are happening in terms of very robust domestic demand, strong investment, both public sector and private investment.
How should India navigate the challenges around tariffs?
We always say try to turn every crisis into an opportunity. It is good to engage in negotiations with the US and try to develop levels of understanding and see if you can’t bring some of those tariffs down or at least avoid the risk of further escalation. The second aspect is to think of internal reforms.
ADB has always advocated an open, multilateral trading system. It will probably be a good idea for India to try and lower its tariff, not allow them to keep creeping up, as they have been. Maybe, negotiations with the US are an opportunity to mobilise more support for that direction of reform, which will definitely contribute to improving India’s export competitiveness because you need cheap imported inputs to be competitive on exports. We know that greater use of imported inputs helps you improve productivity and quality of goods.
Should India go for a selective reduction in tariffs through trade deals or should reduce duties across the board as there are fears that it may lead to a surge in imports from China?
Most favoured nation-style tariff cuts will be more effective as it represents greater trade liberalisation. The concern about imports from China is a sensitive issue, but the fact is that you can’t fear competition. There are issues with China. Some people have been concerned that maybe China has overproduced. Based on WTO principles, anti-dumping, countervailing duties can be availed of. There may be goods where China is much more competitive and importing them is good for consumers, and producers, if these are intermediate inputs.
Part of having closer economic ties with China, hopefully there will be understanding at a high level, that greater efforts to liberalise trade or FDI into India from China, should also be reciprocated by greater efforts the other way too. That it’ll help generate more markets for Indian goods in China or opportunities for Indian investments in China.
There is demand for govt support to some of the sectors which may be hit by the US tariffs. Are you in favour of such support and how long should that last?
There is rationale for govt to step in when there are sudden shocks because you don’t want these firms exiting when they have capabilities. You also care about the welfare of their employees. How long? It shouldn’t be too long. Most countries err on the side of too long. But if a firm cannot prove that it’s competitive, that maybe it was producing something that only could be sold in the US and now it’s just not being successful at finding another way to be successful, then you’re not doing them a favour or helping the efficiency of govt resource use by prolonging support. It just needs to be temporary.
How do you look at India against the backdrop of what’s happening geopolitically, especially the Trump tariffs?
We’ve downgraded our forecast compared to April. India is now facing one of the highest tariff rates, 50%. Thankfully, services exports are not being targeted by the Trump regime, which is important for India. Exports going to the US that are subject to the 50% tariff are around 1.2% of India’s GDP. It’s not going to have a major effect on growth, which is why our downgrades are fairly modest.
Our growth forecast for India is still quite robust, 6.5%. It’s the second highest growth for all countries in Asia. That reflects a lot of good things that are happening in terms of very robust domestic demand, strong investment, both public sector and private investment.
How should India navigate the challenges around tariffs?
We always say try to turn every crisis into an opportunity. It is good to engage in negotiations with the US and try to develop levels of understanding and see if you can’t bring some of those tariffs down or at least avoid the risk of further escalation. The second aspect is to think of internal reforms.
ADB has always advocated an open, multilateral trading system. It will probably be a good idea for India to try and lower its tariff, not allow them to keep creeping up, as they have been. Maybe, negotiations with the US are an opportunity to mobilise more support for that direction of reform, which will definitely contribute to improving India’s export competitiveness because you need cheap imported inputs to be competitive on exports. We know that greater use of imported inputs helps you improve productivity and quality of goods.
Should India go for a selective reduction in tariffs through trade deals or should reduce duties across the board as there are fears that it may lead to a surge in imports from China?
Most favoured nation-style tariff cuts will be more effective as it represents greater trade liberalisation. The concern about imports from China is a sensitive issue, but the fact is that you can’t fear competition. There are issues with China. Some people have been concerned that maybe China has overproduced. Based on WTO principles, anti-dumping, countervailing duties can be availed of. There may be goods where China is much more competitive and importing them is good for consumers, and producers, if these are intermediate inputs.
Part of having closer economic ties with China, hopefully there will be understanding at a high level, that greater efforts to liberalise trade or FDI into India from China, should also be reciprocated by greater efforts the other way too. That it’ll help generate more markets for Indian goods in China or opportunities for Indian investments in China.
There is demand for govt support to some of the sectors which may be hit by the US tariffs. Are you in favour of such support and how long should that last?
There is rationale for govt to step in when there are sudden shocks because you don’t want these firms exiting when they have capabilities. You also care about the welfare of their employees. How long? It shouldn’t be too long. Most countries err on the side of too long. But if a firm cannot prove that it’s competitive, that maybe it was producing something that only could be sold in the US and now it’s just not being successful at finding another way to be successful, then you’re not doing them a favour or helping the efficiency of govt resource use by prolonging support. It just needs to be temporary.
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