Ashok Gulati, Distinguished Professor, ICRIER
These are uncertain and risky times. US President Donald Trump’s address to the United Nations General Assembly (UNGA), though a bit weird, was very candid, clear, critical of others, and congratulatory to himself and his policies. He criticised the UN for not doing enough to stop the wars, and not even to make sure that its escalators and teleprompter work. He also criticised Europe for its open-door policy for immigrants and buying energy from Russia. As usual, he also criticised China and India for financing the Russia-Ukraine war by buying Russian crude oil. Enhanced tariff is his pet punishment for the world. India has been hit hard with 50% tariff on goods, and now an enhanced fee of $100,000 on H1-B visas.
Pharmaceuticals were exempted earlier, but they are also coming on his hit list. These harsh measures against India may be the result of many factors. India has not given him credit for stopping the India-Pakistan war, which he has claimed umpteen times, and India is a founding member of the BRICS which he is not very comfortable with. Frustration resulting from not being able to stop the Russia-Ukraine war is another factor. Whatever the reasons, India is in a tight spot, and if the punitive tariffs of 50% stay longer, they will inflict heavy losses and lay-offs in India. Our diplomatic efforts must rise to the challenge and save the economy from this severe blow, including the fast depreciation of Indian rupee.
Prime Minister Narendra Modi refused to go to the UNGA, presumably to avoid Trump’s tirade and displeasure. Instead, he gave a clarion call to Indians to be swadeshi and buy Indian products during this festive season. He also rolled out goods and services tax reforms, which were overdue, to boost the economy. Hopefully, some of these measures will work and India’s GDP in FY26 will not fall below 6.2%, although the Reserve Bank of India is still assuring us of 6.5%. However, when PM Modi talks of Atmanirbhar Bharat (self-reliant India), it may be noted that the two most critical sectors are border security and food security. In securing our borders, we are still heavily dependent on others-be it Russia, France, or the US-for hi-tech equipment. India has a long way to go before becoming fully atmanirbhar in defence. However, India has opened its first defence factory in Morocco, led by Tata Advanced Systems. Defence minister Rajnath Singh, along with his counterpart Abdelatif Loudyi, inaugurated the plant in Berrechid last week, and this is a very good beginning.
Morocco has the largest reserves of phosphate, almost 70% of the global figure. India’s food security is heavily dependent on chemical fertilisers to feed its burgeoning population of 1.45 billion, which is likely to touch 1.66 billion by 2050. For food security, it is critical to ensure smooth and uninterrupted supply of chemical fertilisers. Nitrogenous fertilisers, especially urea, are heavily dependent on natural gas. Almost 90% of our urea is produced with imported gas. We need to diversify the sources of gas supply and correct its pricing to import parity levels, even for domestically produced gas. This will give the right market signals and encourage domestic exploration. In the case of phosphatic fertilisers, India imports either the phosphatic rock or phosphoric acid, and manufactures a part of phosphatic fertilisers (DAP) at home, while importing the rest.
India needs to ensure long-term supply of this raw material. As Morocco is the home of phosphate rock mines, India needs to work closely through joint ventures in their mines. This should be directed towards jointly producing phosphoric acid and phosphatic fertilisers like DAP (18-46-0), single super phosphate (SSP with 16% P2O5), triple super phosphate (TSP with 46% P2O5), etc. TSP can easily replace DAP as both have 46% P2O5, and we are overusing urea (nitrogen) and damaging our soils. So, there is no need to have 18% N in DAP, we can just use urea (46% N) and TSP. If India plays its cards well by joining hands with its Moroccan counterparts the way Tata Advanced Systems did, it can be a game changer for both countries. Jointly, the two countries can be the world’s suppliers of phosphatic fertilisers, with a strong demand emanating from India itself. The OCP Group in Morocco is the largest player in the phosphatic business, and has the favour of the Moroccan government. In India, they have some equity stake in Paradeep Phosphate. Chambal Fertilisers has also some involvement in Morocco, but much more needs to be done for India’s food security.
Union minister for chemicals and fertilisers JP Nadda recently signed an agreement to import more than 3 million tonnes of phosphate annually from Saudi Arabia. But Saudi Arabia just signed a strategic defence partnership with Pakistan, which does not augur well for India. India needs to be cautious about geopolitics to ensure its food security. So far, India is a net exporter of agri-produce. But given that almost 90% of the gas for urea is imported, most of the phosphate is imported in different forms (rock, acid, and finished product), and potash (K) is fully imported, India’s food security needs a critical look. It needs strategic partnerships with countries that India can trust to obtain uninterrupted supplies of these ingredients. PM Modi and Union agriculture minister Shivraj Singh Chouhan have the responsibility to ensure India remains food-secure. As Trump’s mercurial behaviour has heightened risks in the global economy and the US has lost trust, it may be worthwhile for Chouhan and Nadda to emulate Singh and develop joint ventures with trustworthy nations for these critical inputs.