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India should move away from repeated subsidy-driven responses during global crises and instead build long-term economic resilience through structural policy reforms, according to a white paper by Think Change Forum (TCF) on the ongoing West Asia crisis.
The white paper, titled "Economic Ringfence Amid the West Asia Crisis: A Three-Point Agenda for Export Competitiveness, Import Discipline and Trade Defence", argued that rising geopolitical tensions are exposing structural weaknesses in India's economy, particularly its dependence on imported energy, industrial feedstocks and global supply chains. "The global economic landscape faces a profound stress test," the report said, adding that "geopolitical volatility in West Asia is driving structural cost-push inflation across essential sectors -- energy, agriculture, and manufacturing." The paper said India's traditional approach of using subsidies and fiscal interventions to absorb global shocks is becoming increasingly difficult to sustain. "The traditional fiscal response -- relying on open-ended subsidies to buffer these shocks -- no longer sustains," the report stated. Instead, the paper called for structural reforms aimed at improving domestic manufacturing competitiveness and reducing economic vulnerabilities caused by external disruptions. One of the key recommendations in the paper is the correction of India's "inverted duty structure", where import duties on raw materials are often higher than those on finished imported products. "This is not a theoretical anomaly -- it is widespread across India's manufacturing sector," the paper said. According to the report, this duty structure discourages domestic value addition by making imports cheaper than local manufacturing in sectors such as electronics, chemicals, textiles and agri-processing. The paper proposed a "12-month correction" of inverted duties and recommended that import tariffs on essential industrial intermediaries should automatically reduce when global commodity prices rise sharply. "Dynamic Tariff Calibration proposes that import duties on a defined basket of essential intermediaries be linked to a pre-announced price trigger," the report said. The paper argued that such a framework would help Indian manufacturers remain competitive during periods of global commodity price volatility without depending on large-scale subsidies. Another major recommendation in the report was bringing natural gas under the Goods and Services Tax (GST) framework to reduce embedded taxes faced by industries. "The exclusion of petroleum products and natural gas from the GST framework is the single largest structural anomaly in India's indirect tax architecture," the report stated. The paper said the current taxation structure increases hidden operational costs for sectors such as fertilisers, chemicals, food processing and construction, ultimately affecting overall industrial competitiveness. According to the report, including natural gas under GST would help reduce cascading taxes and improve cost efficiency across manufacturing sectors. The paper also called for a shift towards what it described as a "Selective Economic Doctrine", under which India would remain open to critical technology and strategic imports while reducing exposure to external vulnerabilities. "Openness where global integration feeds essential technology, energy, and raw materials. Intervention via immediate trade-remedy enforcement where foreign dumping distorts domestic markets and destroys capacity," the report said. The paper added that India should use the ongoing geopolitical uncertainty as an opportunity to strengthen domestic industrial ecosystems and reduce long-term dependence on volatile global supply chains. "India moves from a 'price-taker' in global supply chains to a 'resilience-builder'," the report said. (ANI)
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