Naushad Forbes, Co-Chairman, Forbes Marshall and the former president of the Confederation of Indian Industry (CII) feels India would do well if it were to turn the challenge on hand into an opportunity and use the challenge posed by the US tariff increases as a reason to hasten the drive to usher in some much-needed and long overdue domestic reforms. “We have to think of what our medium to long-term play is going to be and this, in my view, should have three elements, says Forbes. The first element, he feels, has be around how do we strengthen India in terms of reforms. “We should use this as a reason to drive a lot of useful domestic reforms to make Indian industry more competitive. Second, invest in deepening our trade relations with the rest of the world and third, look at specific interventions and support to those firms exporting to the US and now hit because of the tariff increases,” he says.
Unleashing Competitiveness Through Regulatory Reforms
It may be worth the candle if efforts were directed at effecting all those changes that he feels all have been seeking whether at the Centre or in the states. These could be in relation to ease of doing business or addressing the aspects of cost of doing business. “For examples, we have two regulatory commissions set up already – one under Shaktikanta Das, principal secretary to Prime Minister Narendra Modi. This is for Union government-level reforms and the other under T V Somanathan, the cabinet secretary. Let us quickly start identifying things that need to happen and make those changes and use this as an excuse to bring about those regulatory changes and thereby make it easier for all of Indian industry to be competitive,” he says.
Today, for instance, there are various requirements that firms need to comply with what we require is for each process, each ministry must put up on its website each of the steps that need to be completed. For example, if you need the permission for a firm to operate and get started then let the department of industry list all the steps that are needed are pre-requisites. The longer the list the higher the level of embarrassment because some of the requirements will trigger questions on their need and relevance and that is exactly the dialogue that all need in the country, for it alone will trigger the process of deregulation.
Expanding Global Reach and Providing Targeted Support
Second, 90 per cent of the trade happens in the world without regard to the US so let us worry about what we have to do with the rest of the world and build our trading relations with the rest of the world and put our negotiating skills for the Free Trade Agreements (FTAs) with the European Union (EU), with New Zealand and other countries, think about the larger and more diverse areas – trade dealing with Africa, Latin America and Asia, may be also join the CPTPP. All of these could be transformative to our trading relationships. The CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) is a free trade agreement between a dozen countries – Australia, Brunei, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam apart from the United Kingdom.
Third, as far as the US is concerned, there are some immediate things that need to be done for those firms in select sectors that will be adversely hit by the tariffs and will need help. If for example, there is a garment or a jewellery firm that is exporting to the US and is in need of immediate help to execute the orders that have on hand but will now go under higher tariff. This is not a policy intervention but is more about some immediate, specific, granular and tangible help that needs to extended to firms that have concrete contracts in place already but are now adversely impacted.
For example, if there is a firm exporting garments to the US and has an order on hand and will now be hit by a 50 per cent tariff and its buyer in the US is pressuring the firm to absorb a portion of the increase in price, here the government could consider ways to provide assistance. For instance, there could be ways to offset the cost increases against the taxes that the company pays. For the rest, the companies concerned could pass on the costs to their US consumers, raise prices and add value to also justify the higher prices.