Reciprocal Tariffs and India: Views of Ajay Shah and Laveesh Bhandari
Why in the news
Reciprocal tariffs imposed by US President Donald Trump unsettled many economies, India included. India responded with some tariff cuts and trade talks, raising the question whether it should lower duties more widely, even on its own. Economists Ajay Shah and Laveesh Bhandari discussed it with moderator Prashanth Perumal J.
Key facts
- There is broad agreement that lower tariffs raise efficiency and consumer welfare.
- Shah: varied tariff rates cause greater distortion, so fewer, uniform rates work better.
- Example: a 20% car duty turns a ₹5 lakh car into a ₹6 lakh one, hurting buyers and protecting inefficient producers.
- India should concentrate on sectors where it is globally competitive and import the rest.
| Issue | Laveesh Bhandari | Ajay Shah |
|---|---|---|
| Trump’s tariffs | Aggressive but perhaps the only tool, given WTO’s ineffectiveness; expected to soften | End goal unclear; hitting allies like India may cause lasting disruption |
| Cause of trade disorder | WTO weakness | China’s systemic distortions |
| Non-tariff barriers | Rampant and opaque in almost every sector | Hard to measure; disguised as quality or safety rules |
| India’s response | Cut tariffs gradually on a clear timeline | Predictable phased cuts, plus comprehensive FTAs |
Non-tariff barriers
- Include quality standards, regulatory benchmarks and administrative delays.
- Example given: the EU’s strict sanitary standards for grape imports, equal on paper but burdensome in practice.
Way forward
- Balance domestic competitiveness, consumer welfare and strategic autonomy.
- Move towards uniform, lower tariffs backed by bilateral deals and transparent non-tariff practices.
- Yashwant Sinha’s phased liberalisation is cited as a model.
Exam angle
- Terms: reciprocal tariffs, non-tariff barriers (NTBs), FTA, WTO.
- Shah’s model reform: predictable, gradual tariff cuts.
- Proposed FTA partners: US, EU, UK, Japan.