In brief
Donald Trump's 50% tariffs on goods from India have started, aimed at penalizing India for its dealings with Russia amidst ongoing geopolitical tensions. This decision has driven Prime Minister Narendra Modi to advocate for self-reliance among Indian businesses, promising tax reforms to cushion the economic impact on livelihoods. As tensions rise, the future of India-U.S. trade relations appears uncertain.
U.S. tariffs of 50% on goods from India took effect on Wednesday as Donald Trump sought to punish Delhi for buying Russian oil and weapons.
The tariffs – among the highest in the world – include a 25% penalty for transactions with Russia that are a key source of funds for its war in Ukraine.
India, a vital strategic U.S. partner in the Indo-Pacific, has shown no signs of stopping its purchases, calling the tariffs unfair and vowing to choose the best deal on buying oil to protect its 1.4 billion people.
But there are fears exports and growth in the world's fifth largest economy could suffer. The U.S. was, until recently, India's largest trading partner.
The tariff setback has sent the Indian government into firefighting mode.
Earlier this month, Prime Minister Narendra Modi promised to cut taxes to mitigate the impact of the tariffs that will disrupt millions of livelihoods across the country's export-driven industries that supply everything from clothes to diamonds and shrimp to American consumers.
He said a Diwali gift in the form of a massive tax bonanza was on its way for the common man and the millions of small businesses that power Asia's third largest economy.
Wearing a bright saffron turban and addressing crowds of spectators from the ramparts of Delhi's Red Fort during Independence Day celebrations, Modi urged small shop owners and businesses to put up boards of Swadeshi or Made in India outside their stores.
We should become self-reliant - not out of desperation, but out of pride, he said. Economic selfishness is on the rise globally and we mustn't sit and cry about our difficulties, we must rise above and not allow others to hold us in their clutches.
The former has proved increasingly difficult, with the share of manufacturing as part of India's gross domestic product (GDP) stagnating at 15% levels, despite his government rolling out subsidies.
Experts suggest that initiatives to stimulate the economy and tax reforms could help soften the blow.
Following a $12 billion income tax cut earlier this year, Modi is now pushing for an overhaul of India's complicated goods and services tax (GST) framework.
Private consumption, a key driver in India's economy, is expected to benefit significantly from these planned reforms amidst an environment of increased tariffs and economic struggle.
