The country is seething with anger, and rightly so, against the cold-blooded murder of tourists in Pahalgam last fortnight. While the Prime Minister has promised to bring the terrorists to book, everyone is braying for war with Pakistan. The statements made by the Pakistan army general and ministers in the aftermath of the terrorist attacks are nothing short of an admission of Pakistan’s role.
Instead of a direct confrontation with Pakistan, what could prove to be a more effective initiative is a total boycott and its isolation in the world. War may cripple Pakistan both economically and physically. To weaken it economically, India need not do anything overtly. The internal infighting amongst the provinces will ensure that the economically weak Pakistan becomes even weaker and continues to remain on the verge of bankruptcy. It is already living at the mercy of global institutions and loans and grants given by a few countries, including China.
On the impending trade crisis created by the reciprocal tariffs, India needs to take cognisance of the fact that, given the trade war pyrotechnics in play globally, India is one of the biggest markets after the USA, being wooed by both the USA and China. With the USA, it makes sense to have a mutually beneficial trade agreement with give and take on both sides. India can ensure that the sharing of technology, including artificial intelligence, is also a part of the agreement. India can also look at wresting concessions for the free movement of talent between the two democracies. This has been one of the sore points across several rounds of negotiations at the WTO. Having one of the most talented and smart-working workforces, it makes sense for India to allow free movement of labour.
The USA and China both know that India has the largest consumer base, with people willing to pay for goods and services. No other country can match the scale and breadth of India’s consumption story. The income of the toiling middle class is expected to keep growing with favourable demographics. It is estimated to cross 70 crore by 2030. To put it in perspective, the EU’s current population is around 75 crore, the USA’s is 34 crore, and Japan’s is 12 crore.
Besides the sheer numbers, India’s GDP is also growing at a steady trot, and along with it the income of middle-class families is also showing an uptrend. With the growth in income and aspirations of this fast-growing class, which is expected to double in number over the next 15 years, it is the voracious appetite of this educated middle class which will devour consumer goods, medicines and services. This will be the biggest market in the world.
China exports electronic items including mobiles, electrical machinery, steel and textiles, besides toys, furniture and household appliances. One of the biggest draws for these goods is the cheap prices at which they are exported, making them competitive globally. Of late, China has also been exporting cars. It is also the largest exporter of APIs used by the Indian pharmaceutical industry.
India knows that until it builds the requisite capacities in mobile phones and accessories for solar panels, it will have to continue importing the same from China. It will also continue to import compressors used in air-conditioners from China.
The problem with trade with China is that it is totally one-sided. India imports six times more goods than it exports. India has to ensure that it wrests open the closed Chinese market to enable ingress of Indian goods into China. In 2024, the exports have been less than $15 billion, leaving a trade deficit of nearly $100 billion. This is more than twice that of the deficit with the USA, one of our leading trade partners.
In case of resumption of trade, India has to ensure that China agrees to higher imports from India to minimise the trade deficit. More spices, foodstuffs, plastics and inorganic chemicals need to be allowed. India can insist that China take more Indian goods to ensure parity in trade. If required, the quantum of exports from China can be easily fixed with a view to gradually ensuring a fair balance between exports and imports.
To prevent unfair imports routed through other countries, India needs to keep a check on the country of origin. This can be done by ensuring that the country of origin is statutorily labelled on all goods. Even e-commerce sites can be directed to display the country of origin upfront on all goods and services marketed on their respective platforms.
What is needed at this hour is to realise the importance of our vast market, the growth potential going forward, and to negotiate with a firm hand. Interference in internal matters is strictly off-limits and can jeopardise trade at any time.