Being developed has problems

By Nagaland Post | Publish Date: 6/9/2019 12:36:16 PM IST

 India is being continuously hit by the US. President Donald Trump’s withdrawal of generalized system of preferences (GSP) on 5,111 items is the latest.

Trump says, “It is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019”

The second term of Prime Minister Narendra Modi may have to contend with tightening of the Trump’s policies towards Iran, Venezuela, Syria, Iraq and the Gulf region. He is sending more troops to the region.

External affairs minister S Jayashankar and commerce minister Piyush Goel have to look for policies to counter the US move. India has not been able to take retaliatory steps as Trump says India is a high-tariff nation. It is now mulling ban on $ 10.6 billion worth imports from the US. 

Trump is targeting just not oil that India prospects from these countries but also its sale of steel and other commodities. Indian steel sector is facing difficulties as the US announced high tariff. India has moved to the WTO against 25 percent hike in duties on steel and 10 percent on aluminium. As the US plans replacing over 500 bridges, tariff barriers are to hit the Indian steel industry.

India in 2017 increased steel exports by 87 percent in volume and 74 percent in value terms. But in 2018, US Congress reports note it has fallen by 49 percent to $ 372 million and aluminium 58 percent to $ 221 million. 

Both the countries are also in several other disputes in WTO, including in poultry, export incentives that US considers subsidies and solar. 

India has been enjoying the GSP benefits since 1974. Out of $ 6.35 billion exports GSP benefit is about $ 260 million. Federation of Indian Export Organisation says that exporters may find it difficult to absorb GSP loss.

Sudden move by Japan to drag India to WTO, over duties on electronics in the wake of ‘make in India’ campaign, has surprised the diplomatic circle. Japan has alleged that these import duties are in excess of bound rates, which is a ceiling of import duty beyond which a WTO member cannot go. Japan has also sought removal of duties on cellular phones and printed circuit boards.

Post-Obama lukewarm US approach is hitting India’s energy security. The sanction on Iran is a double whammy. It makes India look for more expensive energy sources as also in a quandary about its diplomacy with Iran. The country has emerged as a key route to Afghanistan and central Asia. The US for now has not put checks on the Chabahar port as that helps the US too. A threat, however, looms large. Former chief economic advisor to government of India Arvind Subramaniam had dubbed the use of access to energy as “carbon imperialism” be it hydrocarbon, coal or nuclear energy. That is dubbed as the neo-imperialism. Each denial raises cost of energy and hurts India.

A financially troubled US tries to hit the world equilibrium, political hugs apart. The military threat to Iran to toe its line is a move to crush the only non-conforming country. 

It also is aimed at India subtly. The US wants Indian involvement in Afghanistan but does not want her to become a real power or axis of global economy as it is trying to woo BIMSTEC - Bangladesh, India, Myanmar, Sri Lanka, Thailand, Nepal and Bhutan or Shanghai Cooperation Council or BRICS.

Modi has a challenging time. It had expected favourable treatment on oil imports from Iran. But tough US stance is causing problem. India has been forced to open its market to innocuous imports of California almonds, Washington apples, and chicken legs from Middle America. For Trump, its chicken feed. India has to buy more to close $ 25 billion in trade deficit.

India’s posturing as a global power and developed economy has hit it. While these are more political in nature hyping some economic gains has its problems. India suffered that in WTO around 2000 as it cancelled exports quota on textiles for budgetary projections that the country was doing well. Now IMF is likely to declare that India instead of being a developing nation is the fastest growing economy. It means more denials of sops. The country in reality is still developing and maintaining a practical posture at international fora would be wiser, instead of projecting unreal stats,for avoiding such policy traps.

 The Samsung producing cellular phones under make in India programme is under challenge by Japan. The country has either to be given tariff concession or a similar treatment to its phone makers in India. It might hit viability of such projects and some, as Nokia did, may be forced to pack off. Thus every policy has a counter.  The country is in a critical economic and technological evolution phase. It has to do the rope trick. It has to keep different powers on its right side.

It has to look for middle path to keep the US happy and not annoy Iran. The US is now also a key strategic partner. So the US cannot be ignored. The balancing act is not easy. Strategically, India can chose to be an interlocutor between the US and Iran to resolve Iranian approach to its nuclear tech.

Iran has been exporting around 1.1 million barrels/day of crude and 200-300,000 barrels a day of condensates to China, India, Japan, South Korea and Turkey under the existing sanction waivers. The US has so far not relented on pleas by these countries.

Prospecting oil from Latin America is possible. But the distance has an economic cost.  The Modi government has to go for bold reforms. It’s a political commitment. Such international nitpicks should not deter it. The government has to overcome problems in the neighbourhood, fighting an international tariff war, hike in oil prospecting costs, and consequent inflationary situation.

These affect the budgetary and other policy options as the government would now require more finances for welfare and boosting the economy in all fronts. The government has functioned intelligently in the past. Now it has to have a sharper policy so that international situation has least impact on domestic economy.

Shivaji Sarkar

Launched on December 3,1990. Nagaland Post is the first and highest circulated newspaper of Nagaland state. Nagaland Post is also the first newspaper in Nagaland to be published in multi-colour.

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