Think tank GTRI asks Centre to boost consumption to offset Donald Trump's tariff

Global Trade Research Initiative, a think tank founded by Ajay Srivastava, said that India can increase domestic consumption to offset the loss of trade to the United States due to Donald Trump's tariffs. Trump's additional tariff took effect today in India, jeopardising lakhs of jobs and several economic sectors, including textileand jewelry.

Srivastava said that India's exports are worth only 20 percent of the economy. He said the Indian economy is big enough to absorbthe tariff shock.

"We have two broad options. One, the bigger option is local markets. Our exports are just 20 per cent of the Indian economy, and the Indian market is very big. It absorbs 80 per cent of Indian production, and there is scope for further absorption of this because the Indian economy is growing at 6 to 7 per cent annually," Srivastava said.

"Domestic consumption can happily absorb some of the shocks," he added.

He said India can also opt for a second measure - exploring other avenues for its exports.

"And for this, the government is making an effort to expedite FTAs with the European Union. And we have already signed an agreement with the UK. So efforts are on to implement that quickly. A few more FTAs, like with Peru and other countries, are on the line," he stated.

The Indian government is already trying to boost domestic consumption. It is mulling over slashing the 12 per cent and 28 per cent GST slabs from the regime and placing the goods and services in these slabs into the 5 per cent and 18 per cent categories. The final decision on the approval will be taken before Diwali.

He said that labour-intensive sectors like diamonds, gems, jewellery, textiles, garments, and shrimp will be impacted. India's regional competitors like Bangladesh, China, and Vietnam, which face lower tariffs compared to India, will increase their exports to the US and replace Indian products.

"Most of the Indian products will be phased out from the US market until some tariffs are brought down," he added.

He, however, hoped that the strain between India and the US over buying Russian oil and weapons would be resolved.

"Negotiations are not terminated. They have just been paused. So there is always negotiation. Both countries are open. No country has said, neither India nor the US, that they are terminating the negotiations. So we hope that soon they may resume," he added.