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Context:

US President Donald Trump introduces tariffs targeting China, and has created a chance for India to attract global businesses by reforming its economy.

News in Detail

The U.S. started to counter China’s growing power by increasing tariffs on imports. These tariffs aren’t just about fixing trade deficits. They are mainly about stopping China from becoming the world’s top economic power.

China has been using strategies called "mercantilism" for years. This means they focus on exporting (selling goods abroad) while limiting imports (buying goods from other countries). Over time, China has grown its share of global manufacturing exports to 30%, beating the U.S.

How Does This Affect India?

• China’s Shift: In 2010, China decided to focus on high-tech products and left low-cost manufacturing to other countries like Bangladesh, Vietnam, and Mexico. But India missed this opportunity because it didn’t make reforms to attract businesses.
• USA Tariffs as a Push: The new tariffs created pressure for companies to leave China and find new places to manufacture goods. India could be one of those places—but only if it makes transformations fast.

What’s Holding India Back?

India’s economy has been growing at 6.2% per year for decades, but it’s stuck because of old policies and resistance to change. For example:

• Foreign Investment Fell: Foreign companies used to invest 2-2.5% of India’s GDP, but now it’s less than 1%. Why? Because of a 2015 law that made it hard for foreign investors to leave India if things went wrong.
• Political Resistance: Reforms like changing farm laws face huge protests, but non-economic reforms (like education or technology) are easier to pass.

What Should India Do Now?

India has two choices:

• Stay Comfortable: Keep growing at 6.2% per year without taking risks.
• Transform: Make bold reforms to grow at 7.5-8.5% per year. To do this, India needs to:
  • Open up trade (buy and sell more globally).
  • Attract foreign investment by making rules friendlier.
  • Remove unnecessary regulations that slow down business.

India is young and full of potential. It has a large workforce that’s skilled and ready for jobs in tech and manufacturing. Countries like the U.S. see India as a good alternative to China. If India acts now, it can become a global manufacturing hub and attract billions in investment.

What’s Next for India?

Big changes might happen soon:

• India may sign a trade deal with the U.S., which could lead to deals with the UK and EU too.
• This could be like 1991 when India opened its economy and started growing faster.

Way Forward

India is at a turning point. With the U.S. and other countries pushing back against China, India has a rare chance to grow stronger. But it must choose between staying safe or taking bold steps to become a global leader in manufacturing and investment.

Must Read Articles:

Indian Economy Overview 2024

India's Trade Trends, Trade Deficit 

Source:

 INDIAN EXPRESS

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