Triumpian times a nightmare in the making for India

In the run up to Donald Trump getting elected as President, one ethnic community/nation that was conspicuously sanguine about the prospect was Indians/India.   The rationale was that India doesn’t depend so heavily on foreign trade as China and has not taken away so many manufacturing jobs from USA.  So Trump’s war will be with China, not India.  A group of US-based Indians even formed a Hindu coalition in his support.  Oh, wait, there was also the hope that Trump would be less pro-Pak than previous US presidents.

As has been the case before, the above showed both a neglect for data, for facts as also a lack of understanding of geo political realities.  When one power decides to take on another, it has to size up how many friends it will have by its side in the fight.  So what happens if USA takes on China?   The EU may turn against USA, for one.  China is EU’s second largest trading partner. behind USA.  USA accounts for 17.5% of EU’s total international trade and China for 14.8%, so the gap is narrow.  Where’s India?  Only 9th, behind Japan, South Korea,  Russia etc.   Heck, even USA’s good friend UK may not go along with an all out trade war on China.  USA Inc may not be comfortable if Trump declares (trade) war on China.   A war on China could plunge USA into majestic isolation and accelerate the transition to the hegemon in waiting, namely, China.

But India?  It’s a very different scenario.  India has a relatively low volume of trade with USA with a disproportionately high surplus.  This is at least partly on account of high import duties (within WTO rules) to push foreign corporations to set up shop in India to at least assemble stuff here.  India is also a major operator in outsourced services, evidenced by the fact that its share of worldwide exports of services is twice that of its share of merchandise exports.  With its growing population and relative proficiency in English (compared to China or other East Asian tigers), India presents a greater threat to service jobs in USA.

So here’s what Trump CAN do (and he dropped a hint with his reference to Harley Davidson): either launch an assault on India’s high import duties and make India curtail outsourcing in exchange for maintaining these barriers to merchandise trade.  OR strike outsourcing and push India to drop import duties in return for continuing to provide services at the expense of American employees.

MY guess (and I could be wrong) is he is more likely to do the latter.  After all, where will service sector jobs in say IT or accounting return to?  Places like NYC, San Francisco or Seattle which are in states that roundly rejected Trump and will likely do so again in 2020.  But if Trump can get countries (including India) to lower trade barriers and simultaneously compel American companies to make in USA, the Rust Belt, which swung in his favour last year, will be delighted. Basically, easy reaping of political capital for Trump with relatively low risk.  It will be a terrible waste of Modi’s zillion cries of Make in India but he would probably also prefer to keep high paying service sector jobs in exchange for putting India’s manufacturing sector under greater stress.  He might also reason that USA does not have products tailored for the high volume segments in India.  Whether this will be the case remains to be seen.

Be that as it may, it behooves the GoI to think seriously about what Trump could do to India (rather than for India as Indians allowed themselves/ourselves to believe) and act decisively to protect our position.  The Budget, made in the knowledge that USA could deliver the bazooka of a sharp cut in corporate tax, did not seem to acknowledge this reality and indicated a preference for business-as-usual.  But going beyond economics, India also urgently needs to mend fences with China, its 800 pound gorilla of a neighbour, and Russia, once its good friend and now aligning with Pakistan, a nation that helped topple the Soviet Union.  Failing that, a bear hug with Trump and roll out the red carpet for the Trump Organisation (you know what I mean).

But something needs to be done and something needs to change, that much is for sure.  It is understandable that the ruling party would presently be punch drunk with the stupendous results in the UP elections.  But if Ramraj is not to end up becoming a laughable and sad parody for social media memes, then India must formulate a pragmatic and realistic strategy to handle the gigantic disruptions that may be coming our way in the Trump era.

PS:  Why do I think Trump won’t risk majestic isolation in taking on China?  Because he is a populist and badly needs the love and affection of his core constituency.  India’s prospects, on the other hand, were better under Bush Jr and Obama, who tried to make India a counterweight. Yes, Trump loves Hindus, because we are as easily flattered and more easily deceived.

 

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2 Responses to “Triumpian times a nightmare in the making for India”

  1. sravishanker1401gmailcom Says:

    Superbly written – starkly blunt – I’ve been crying hoarse about this in my whatsapp groups but no one seems to listen…

  2. Madan Says:

    Thanks and welcome to my blog. 🙂 Yes, agreed, this is not really being paid attention to. China had to do nothing more than nudge North Korea to scare USA a bit to reset the dynamics back in their favour. By the same token, thus far, the Trump administration’s struggle to reconcile warring factions within the GOP is helping stall the tax bazooka. But in the meantime, India is heading for a majestic isolation of its own. This is a great opportunity for India to position itself as the one nation among emerging economies (of a large size/population) which will support free enterprise but we only seem to be losing more and more of our own freedoms by the day.

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