Amid global gloom, opportunities for new sectors to shine

With the 'Liberation Day' and related announcements by President Trump, global trade has entered a new phase which may facilitate transformation into a completely new trajectory. With minimal tariff of 2.5-5% levels, the US has now increased tariffs between 10% and 49%. The effective tariff rate would be around 25% for almost all the members of the global trading community deeply engaged with the US.Reactions from the Asian countries are on expected lines. While Japan, South Korea and Thailand have started coming up with measures to absorb the impact of new tariffs, China has already filed a case against the US with the WTO, announced counter measures and also alerted the companies from China to minimise their investment exposures.While in India, with steep 26% reciprocal tariff, disappointment may prevail, but it is to be noted that there are sectors like pharmaceuticals that have been kept outside the new tariff regime for the time being. Similarly, since the tariffs are worldwide, the challenge of competition would be for almost all countries, but at the same time opportunities for new sectors may come up. For instance, in pharmaceuticals, textiles, apparel and electronics. At this point, out of total Indian exports to the US of $75.9 billion, India's export of pharmaceuticals stands at $8 billion, of textiles at $9.3 billion, and electronics at $10 billion. With push to textiles through the PLI and other schemes, performance of this sector has improved. The government has introduced multiple schemes to enhance textile production, boost investments and promote exports by providing $1.4 billion (under PLI) and also by extending financial incentives for large-scale textile manufacturers.Similarly, the government has announced a $2.7 billion PLI scheme for the electronics sector.India should continue to focus on enhancing efficiency and performance of these sectors, as much higher tariffs in other countries may provide new opportunities for Indian producers. It is to be noted that among the key exporters of these products, discounted reciprocal tariff for Bangladesh is at 37%, Sri Lanka 44% and Vietnam 46%.At this point, India should have a two-pronged strategy. First it is to focus on bilateral trade agreement (BTA) with the US and work out all the possible facets for a mini-trade deal, largely building on what has already been accomplished at the IPEF. Along with this, momentum for other FTAs, like with the EU, etc., should also continue. Second, there is a need to continue to build domestic industrial resilience. The national strategy comprising these measures would also have to factor in investment and financial sector engagement.The fact is that, time and again, the US and the IMF have been raising the issue of currency manipulation. This requires full explanation with convincing data details. Earlier, the RBI had explained that it does not target any specific rupee level, but intervenes only to absorb additional volatility, emanating out of non-market interventions in the global economy.(The writer is director general at the Research and Information System for Developing Countries (RIS). The views expressed are his own.)