Indo-US trade deal: Indian negotiators find their hands tied

While announcing , US President Donald Trump singled out India to impose an 80 per cent tariff on rice. That was as clear a signal as any of what he has in mind. While India has sensibly protected Indian from international competition by putting up tariff barriers, there are doubts about the Indian government’s ability to withstand US pressure.

Most experts appear to be hoping that Indian negotiators will be the US trade team to leave Indian food grains alone. Indian farmers, with an average land holding of 2.5 acres and measly subsidies, cannot compete with US farmers with an average land holding of 500 acres and the given to them by the US federal government.

The experts also seem resigned to the reality that India will have to make some concessions to the US President in these sectors as well. Certain dairy products like cheese and chocolates and agricultural produce like corn, soybeans and cotton appear more vulnerable to imports from the US. The Americans may also insist on India opening up its market to chicken, eggs and meat.

Besides the ability of the Indian government to withstand US pressure, there are also doubts about the capacity of Indian agriculture and industry to become more competitive in the short run. Indian products have failed to find new markets and sectors like gems and jewellery, pharmaceuticals, textile and garments etc have shown little appetite or ability to get out of the protectionist mindset.

Following the US President’s announcement that pharma tariff is next on his radar, India’s over-dependence on the US market for pharmaceutical exports too has now come back to haunt the sector. The euphoria caused by the initial belief that the sector had been exempted did not last longer than a day.

As commentators have already pointed out, with global trade in freefall, the Modi government faces a stark choice: bow to Trump’s demands or brace for .

While no expert has said so openly until now, many of them seem to believe that it was a mistake for PM Modi to make a public pledge that with the US would double by 2030. The readiness with which India agreed to start a bilateral negotiation with the US for a trade deal has also returned to haunt Indian negotiators, they believe.

The Indian commerce ministry has no option but to humour the Americans, and the strain is showing on Union commerce minister Piyush Goyal, manifest in the smile disappearing from his face and his frustrated and uncharacteristic swipe at Indian startups. Addressing a ‘Startup Mahakumbh’, Goyal could barely hide his frustration, accusing startups of turning India’s unemployed youth into delivery boys and girls for the rich.

Negotiations with the US for a trade deal would slow down, if not hamper, trade deals with the EU, UK, and Canada as well as Japan and other countries. Any possibility of India bargaining hard with the US or taking an , Canada or EU have done is also ruled out.

There are already indications that India is ready to buckle down and reduce tariff on automobiles, especially electric vehicles. It is getting trickier though with not just but also Chinese EV manufacturer BYD eyeing the Indian market. Can India afford to open up the market for Tesla but not to BYD is the question.

India’s foreign trade is unfortunately in for considerable turmoil ahead. And it does not appear to be ready to cope.