It could be argued that Trump’s tariffs on India are not necessarily a bad thing, in so far as they may force the Indian government to open up the market, increasing competition and thereby promoting economic development, says former RBI deputy governor Viral Acharya. He thinks that removing the tariffs would mean that Indian firms would have to compete with the best in the world, resulting in better quality jobs and a larger manufacturing base.
As of now, Trump has threatened to impose reciprocal tariffs from April 2, 2025, which could pose a 10% differential effect on India. In response, the government has already cut import taxes on car, chemicals, and electronic products in a bid to reduce risks. For instance, Acharya points out that increased foreign participation could lead to strategic partnerships that may help in the transfer of technology and enhance innovation in the Indian industries.
Acharya has previously criticized India’s ‘Big 5’ corporate dominance, where Reliance, Tata, Aditya Birla, Adani and Bharti have been protected by high tariffs which kept foreign competition at bay. He recommends a slow phasing down of tariffs to avoid disrupting business and to instead encourage investments in efficiency, innovation and upgrading the workforce.
According to Acharya, opening the Indian market to global competition is the key to long-term economic change. He explains that removing tariffs and increasing competition may force Indian firms to improve their productivity and become global players. This approach is consistent with the economic liberalization of the 1990s and 2000s that saw India’s economic growth accelerate.
