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As India faces potential trade headwinds that could impact its USD 87 billion exports to the United States, the country must accelerate market diversification and leverage its strengths in services to maintain economic momentum, according to former Labour Secretary Sumita Dawra.
On Wednesday, President Donald Trump announced the imposition of 25 per cent tariffs on Indian goods and an unspecified 'penalty', even as there were hopes of an interim India-US trade deal before August 1 deadline -- which would have otherwise helped avoid elevated tariffs. Commerce and Industry Minister Piyush Goyal made a statement in both houses of the Parliament, stating that the government is examining the impact of tariffs and will take all necessary steps to safeguard the national interest. Speaking about the challenges facing India's export-dependent sectors, Dawra highlighted concerns for labour-intensive industries, including electronics, jewellery, pharmaceuticals, textiles, and leather goods, that could be significantly impacted by changing trade dynamics. However, Dawra emphasised substantial opportunities for diversification across multiple geographies. "We see strong growth coming from other countries, for example, Africa, the Middle East or Central Asian countries, and Europe. We are doing FTAs, we have just concluded with the UK," she noted. The former bureaucrat identified Africa as showing fast-growing demand for Indian pharmaceuticals, textiles, and digital services, while energy-rich countries in the Middle East and Central Asia present additional expansion opportunities. Recent trade agreement progress, including the concluded UK FTA and ongoing EU negotiations, further opens European markets. Dawra stressed the importance of strengthening ties within India's immediate neighbourhood, particularly through initiatives like BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation), which includes Nepal, Bhutan, Myanmar, Bangladesh, Sri Lanka, and Thailand. "These are countries with whom we can have stronger regional trade ties at this point in time, also low-hanging fruit, and we can also develop regulatory standards and build a stronger regional trade partnership using this challenge as an opportunity," she explained. She also suggested expanding UPI usage for regional trade, which would demonstrate India's digital public goods globally while generating licensing fees and technology integration opportunities for Indian IT companies. Highlighting India's position as the world's seventh-largest services exporter, Dawra emphasised this sector's resilience against tariff barriers. "Services are less vulnerable to tariffs. We are very strong in it, and business processing services are very strong in edtech. Edtech is a great sector to develop a low-hanging fruit, and also telemedicine, attracting more medical tourism." She advocated for developing digital economy partnerships similar to Singapore's agreements with Australia and the UK, creating digital corridors that reduce regulatory hurdles and promote business growth. The former secretary called for greater focus on high-value exports, particularly in electronics with backwards integration, biotechnology, pharmaceuticals moving beyond generic products, and green technology sectors. She also emphasised strengthening India's position as a global capability centre hub, leveraging competitive labour costs and available skills. Drawing parallels to India's COVID-19 response, Dawra suggested replicating the empowered group structure that enabled rapid decision-making during the pandemic. "During COVID, we had the Empowered group of secretaries... taking fast decisions, meeting the challenges head-on. So if we have empowered groups, maybe in the area of investments, or taking decisions where PLDP is concerned, in the area of trade deals, so maybe things could move much faster." Dawra reminded that India's domestically-led economy provides inherent stability. "India is a domestically led economy, so we should continue to be attractive for foreign investments," she said, emphasising the country's large, competitive labour pool as a continued advantage. The former secretary concluded that current challenges could serve as an inflection point for exponential growth, provided India demonstrates the same capabilities and determination shown during the pandemic response. With negotiations ongoing and outcomes expected by the end of August, Dawra's comprehensive strategy emphasises India's multiple strengths and diverse opportunities for maintaining economic growth despite potential trade disruptions. (ANI)
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