Now we know.

"US President Donald Trump slapped India with some of the highest tariff rates imposed on any major US trading partner," as "The Trump administration imposed a 26% tariff on imports from India, which is slightly higher than the 20% levy for the European Union, the 24% for Japan and 25% for South Korea." ET. The State Bank of India projected a reduction of 3-3.5% for India's exports to the US. "US total goods trade with India were an estimated $129.2 billion in 2024." India imported goods worth $41.8 billion while exporting goods worth $87.4 billion to the US in 2024. "The US goods trade deficit with India was $45.7 billion in 2024, a 5.4% increase ($2.3 billion) over 2023." ustr.gov. "The latest Emkay report estimates that India could lose around $6 billion (0.16% of its GDP) in exports to the US if tariffs are set at 10%. If the US increases the tariff to 25%, the impact could rise significantly to $31 billion." ET. "Trump...announced China will be hit with a 34% tariff, on top of the 20% he previously imposed earlier this year, bringing the total new levies to 54%." "Trump also signed an executive order closing a trade loophole known as 'de minimis' that has allowed low value packages from China and Hong Kong to enter the US duty free." China sells more than $400 billion worth of goods to the US annually. Reuters. In April 2024-January 2025, India's total merchandise exports were worth $358.91 billion, while imports were $601.90 billion. Services exports were $323.68 billion while imports were $168.17 billion, giving a total trade deficit of $87.47 billion. pib.gov.in. Should the tariff of 54% on China be a cause for celebration? Sadly no. Finance Minister Nirmala Sitharaman "highlighted the necessity for India to navigate the escalating global tariff conflicts 'smartly' to protect against potential dumping of goods from nations facing increased US tariffs." ET. As China looks for alternate markets for its goods, India's manufacturers, used to being protected by high tariffs, could be swamped.  In November 2024, services exports were "provisionally estimated at $35.7 billion, compared with $32.1 billion of merchandise or goods exports." This was the first time services exports were higher than goods exports. TOI. A poor country moves from agriculture to industrialization and then to services but India has skipped the industrial phase and skipped straight to services. "In a globalized set up, there is nothing wrong in having a more developed services sector, but the worry is that our dependence on imports will tend to increase if we do not create the domestic capabilities needed for a manufacturing upsurge," wrote Madan Sabnavis. Trump wants India to import food grains from the US but India should resist that because the US heavily subsidises food production (BBC) and it will be disastrous for our farmers. Trump has shown his hand. Can we trump him?   

Gold, not Goldilocks.

"The Indian central bank will collaborate with the government to improve the inflation targeting framework and to obtain the 'Goldilocks conditions' for inflation and growth through appropriate monetary and fiscal policies, said Governor Sanjay Malhotra." Goldilocks is a golden-haired girl in a fairy tale for pre-school children, emphasizing perfection. wikipedia. Hopefully, the governor is not spinning a fairy tale for us. "Reserve Bank of India (RBI) is the custodian of our financial system. It completed 90 years of its journey yesterday. The theme for our 90th year was 'Stability, Trust and Growth'," wrote Governor Malhotra. Stability of prices "is important as inflation erodes the value of money" and "hurts the poor even more." However, "Experts believe that a moderate level of inflation is healthy for economic growth." What is moderate? Define it, please. In 2021, the RBI was asked by the government "to maintain retail inflation at 4% with a margin of 2% on either side for another five-year period ending in March 2026." ET. The RBI has been consistently overshooting the 4% target by more than 1% since 2014. RI. The reason inflation fell below 4% from 2017 to 2019 was because the GDP growth rate fell dramatically from 8.26% in 2016 to 3.87% in 2019 (pre-Covid) (Macrotrends) because of the "failure of epic proportions" in the demonetization of Rs 500 and Rs 1000 banknotes on 8 November 2016 (wrote Vivek Kaul). One indication of soaring prices is the rise of 9.9% year-on-year (YoY) in goods and services tax (GST) collections at Rs 1.96 trillion in March. "Net GST collections for FY25 is Rs 19.56 trillion, up 8.6%. ET. "Stability also refers to financial stability" and "includes stable foreign exchange rates". The exchange of the Rupee was 59.44 to one US dollar on 15 May 2014 (Thomas Cook), the day Mr Modi won his first general election (wikipedia). One USD buys Rs 85.63 this morning (xe.com) a drop of 44%. If a ship sinks by 44% in water, nobody in his right mind would call it stable, would they? "Currency will serve its purpose only if the public trusts it to be safe to use." But, Indians do not trust the currency or the government's inflation rates. The RBI's survey of households in January 2025 showed that median inflation perception was 8.3% (rbi.org.in), nearly double the Consumer Price Index (CPI) inflation rate of 4.31% (Provisional) (mospi.gov.in). Inflation expectation at three months was 9.3% and at one year was 10.2%. Despite the RBI's forecast of an inflation rate of 4.2% for FY 2025-26 ET. People do not believe the inflation rate or the RBI. As for the rupee, "India's gold imports fell to 712.1 tonnes in 2024, down from 744 tonnes in 2023, according to the World Gold Council. CNBC. In 2023, Indian households held 24,000 to 25,000 tons, or over 25 million kilograms of gold. TOI. Because, "Traditionally, gold's acted as an inflation hedge," wrote Somnath Mukherjee. "Desire for gold is not the gold. It is for the means of freedom and benefit," said Ralph Waldo Emerson. Governor Malhotra has good intentions but should not resort to fairy tales. Listen to the people. They don't believe.    

Bracketed with China.

"This week, FM Nirmala Sitharaman defended the provisions of the new income tax bill, which allows any authorized officer to 'break open the lock of any door, box, locker, safe, almirah, or other receptacle...or gain access by overriding the access code to any said computer system or virtual digital space, where the access code thereof is not available." ET. There seems to be no safeguard for citizens, such as obtaining a warrant from a judge after showing credible evidence for any suspicion of wrongdoing or compensation for damage to property. The law makes officials completely unaccountable. "The police force, tasked with maintaining order and protecting citizens, has become a source of fear" because of "Custodial torture, third-degree interrogation methods and custodial deaths" as "The absence of accountability allows police officers to abuse their authority, often victimizing the very people they are meant to protect," wrote Karti P Chidambaram. A government, drunk with unlimited power over citizens, is unable to accept any objection to its actions from other countries. "The ministry of external affairs...strongly refuted a report published by the New York Times" which "alleged that between 2023 and 2024, a British aerospace firm, HR Smith Group, shipped restricted technology to HAL (Hindustan Aeronautics Ltd), which was later linked to transactions involving Russia's state-owned arms agency Rosoboronexport." TOI. "The government...hit out at US Commission on Religious Freedom (USCIRF) for raising concerns in its annual report about India's treatment of minorities and seeking sanctions against RAW for allegedly plotting to kill Sikh separatists.  TOI. "A report by the United States intelligence community has identified India and China as 'state actors' often 'directly or indirectly' enabling 'non-state actors' as sources of precursors and equipment for drug traffickers." DH. The US is accusing arms of the Indian State of facilitating smuggling of precursors of fentanyl to the US. India reacted furiously by expelling Canadian diplomats after former Canadian Prime Minister Justin Trudeau publicly accused Indian agents of assassinating Canadian citizen Hardeep Singh Nijjar in Canada. BBC. Trudeau has resigned and Mark Carney is the new prime minister of Canada. AP. And yet, "India is likely to interfere in the Canadian general election on April 28 the country's spy service said." ET. Canada's Liberal Party has revoked Indian-origin Chandra Arya's bid to run for the party leadership and the nomination in his own Ottawa Nepean constituency over his alleged ties to the Indian government." HT. India is being bracketed with China, not for creating wealth or being a manufacturing behemoth, but as a delinquent state engaged in smuggling drugs, murdering citizens of other countries and oppressing minorities. A nation that brutalizes its own citizens with complete impunity becomes deluded in the width of its own power. Other nations will react. With anger. And contempt.        

Gun to the head good for us.

"Donald Trump has set April 2 as the date for implementing reciprocal tariffs on a range of imports," and "revealed he was initially planning to enact the tariffs on April 1. However, he decided to delay by one day to avoid the possibility of being accused of an April Fool's joke." ET. "India and the United States have agreed to finalize part of a bilateral trade deal by this year but neither side gave indications of any tariff exemptions for the world's most populous nation." "India's protectionist policies and its trade surplus with the US leave it open to retaliatory tariffs from the Trump administration." ET. Trump warned of a 25%-50% tariff on Russian oil if President Putin does not sign a peace deal with Ukraine. "India would be unable to do business in the US" because "India imports over 85% of its oil needs" and "According to a CREA report, India purchased fossil fuels worth EUR 205.84 billion from Russia from the start of the war until 2 March 2025." TNIE. India exports $2.2 billion worth of auto parts to the US every year. If 25% tariffs are applied uniformly on all countries, India will not lose its competitive advantage. However, what Indian companies "do fear is pressure from importers to absorb at least part of the cost, thereby eroding profitability." TOI. "The US is pushing India to relax non-tariff barriers," including local content requirements, differential tax treatment, quality control orders, data localisation policies, Minimum Support Price on agricultural produce and a level playing field for Indian and US banks. CNBC. That would be terrifying for Indian businesses which, protected by high tariffs and non-tariff barriers, are accustomed to making huge profits by selling to Indians at high prices without having to bother about quality or innovation. South Korea "spends 5% of its GDP on R&D, whereas India only 0.7%. Of this small sum, the Indian private sector contributes a niggardly 41% against Korea's 79%. Samsung invests 8-11% in R&D, but Reliance a paltry 0.6%," wrote Prof Dipankar Gupta. Prime Minister Narendra Modi has been protecting a "small team of national champions" "from foreign competition, tariffs that in 2011 had almost fallen to China's 7% level were raised to 12% level by 2022, among the highest in the world. The preference for shielding oligarchs with hefty tariffs, favorable government contracts, as well as non-tariff barriers like stifling rules for foreign-backed commerce, has been pretty well known internationally," wrote Andy Mukherjee. The Indian government is "now convinced that Indian manufacturing will never be able to produce things more cheaply or with consistently higher quality than its peers," wrote Mihir Sharma. "The two moments when India carried out substantive reforms, it had a gun held to its head." "Trump threatening to pull the trigger will be the third. It is just what was needed to wake-up India's self-congratulatory establishment from its headline-managing fantasies," wrote Shekhar Gupta. If Trump does pull the trigger on tariffs, India can respond by exporting guns to the US. Trump has officially promised to protect Second Amendment rights. The White House. Let us supply him with triggers to pull. Compensate for tariffs. 

Interesting times.

In September 2024, "The International Monetary Fund (IMF) has approved a $7 billion loan to cash-strapped Pakistan." "Pakistan has taken more than 20 loans from the IMF since 1958 and is currently its fifth-largest debtor." BBC. On 25 March, "The IMF said...it has reached agreement with Pakistan on a new $1.3 billion loan program and reviewed an existing bailout that would, if approved, unlock an additional $1 billion." NDTV. The IMF may help a country in extreme financial difficulty but loans have to be repaid. "Argentina is one of the largest and most frequent borrowers of the IMF." In 2018, it received a record $57 billion loan from the IMF. "Fast forward to early 2025, and the country still faces an outstanding IMF debt of roughly $44 billion." Dawn. On 25 March, "Iran's currency hit a record low of 1,039,000 rials to the US dollar.., as the absence of nuclear talks with the US continues to fuel economic uncertainty." "The steep decline began after Israel launched devastating attacks on Iran's proxy, Hezbollah, in Lebanon in September, undermining Tehran's regional influence." The election of Donald Trump as US President has added to the pain. Iran Int. "The Chinese government has promised new child care subsidies, increased wages and better paid leave to revive a slowing economy. That is on top of a $41bn discount program for all sorts of things, from dishwashers and home decor to electric vehicles and smart watches." "While the US and other major powers have struggled with post-Covid inflation, China is experiencing the opposite: deflation," as "prices fell for 18 months in a row in the past two years." BBC. As China's economy slowed people cut down on eating out and "That unleashed a price war in which food providers are offering coffees at 9.9 yuan ($1.40) and four-person set meals at 99 yuan ($14)." "A restaurant in China has an average lifespan of just about 500 days, analysts say, falling to as low as a year in Beijing, where municipal data show net restaurant profits plunged 88% in the first half of 2024." Reuters. In 2010, China banned exports of rare earths to Japan after it arrested Chinese fishermen trespassing in its waters. Since then Japan has adopted a policy of "Critical mineral security and the 'garbage is gold' approach." However, waste production is shrinking in Japan but rising in India, so Japan is investing in India. FP. "China will export deflation and recession to the world," said Kotak Mutual Fund MD Nilesh Shah. "After Trump's aggressive tariff push, cheap Chinese goods - redirected from the US - are now flooding emerging markets. Countries from Southeast Asia to Latin America are grappling with job losses, collapsing local industries, and surging trade imbalances.' BT. Just a sample of economic turmoil in the world. Seems that everyone is going to live in interesting times  (wikipedia). Like it, or not.    

Gun to the head.

"Rebutting comments of the Opposition members made in Rajya Sabha," Finance Minister Nirmala Sitharaman said, "So, in response to the tariff announcements made by President Trump, here are we doing it. No, we have been doing it from 2023." HT. Why were they raised in the first place? "Finance Minister Arun Jaitley's budget for 2018-19 proposed an increase in customs duty on a range of products - from fruit juice to mobile phones - to incentivize domestic value addition and boost the government's Make in India program." Mint. In Budget 2019-20, Ms Sitharaman "proposed hike in customs duty on 75 imported items to give a push to Make in India program." India Today. Again in Budget 2020-21, Ms Sitharaman "has provided a definitive push towards government's Make in India theme with import duties hiked on a host of products." BT. In Budget 2021-22, import duties were raised on electronics, auto components and agri produce to help in Atmanirbhar Bharat (self-reliant India) program. BS. What happened to Make in India? Sadly, Bharat could not become Atmanirbhar on Make in India, so Production Linked Incentive (PLI) scheme was launched in 2020, "With an impressive outlay of Rs 1.97 trillion (over US $24 billion)" to provide a leg-up to "14 critical sectors" "to enhance the country's manufacturing prowess". static.pib.gov.in. How successful have these experiments been? "The decade ending 2023-24 shows an interesting trend of a distinct decline in the contribution of manufacturing in India's overall story of economic growth." "In terms of gross value added (GVA), which denotes output, its share has come down from 16.5% in 2013-14 to 14.3% in 2023-24," wrote Madan Sabnavis. Mr Narendra Modi won his first term as prime minister in 2014. wikipedia. Steadily downhill since then. Indeed, India's trade data show that the country's "share in global merchandise exports continues to remain below what it was at the time of Independence, nearly 80 years ago." The Print. "Above all, firms don't know if domestic consumers will be able to buy what they make." "A recent survey of 16,000 consumers by New Delhi-based LocalCircles showed that one in four of them expects their earnings to drop by 25% or more in 2025," wrote Andy Mukherjee. "The huge increase in household debt is alarming" and "the total household debt in India during 2010-11 was 8% of GDP and has now edged up to 37%," said economist Pinaki Chakarborty. Trump's tariffs are a gun held to India's head. "It is just what was needed to wake up India's self-congratulatory establishment from its headline managing fantasies," wrote Shekhar Gupta. Ms Sitharaman has been reducing tariffs since 2023. Please tell us why?

Billionaires and 103.1% GDP.

"There are various headlines coming in everyday from the Trump administration," and "There is chatter of a possibility of stagflation-like situation brewing in the US." "The Rupee has strengthened, following the dollar theme. From a low of 87.95 we are down to sub 86 levels." "Only if we see a big risk off move globally, we may see all time lows of 87.95 get threatened again," wrote Abhishek Goenka. The rupee is trading at just over 85.60 to one dollar this morning. xe.com. "India's Gross Domestic Product (GDP) has doubled in the last ten years," and according to the International Monetary Fund (IMF) "has seen 103.1% growth in GDP at current prices or nominal GDP." TOI. "Prime Minister Narendra Modi...said the World Bank has expressed confidence that India will continue to be the world's fastest growing economy in the coming years." ET. US President Donald Trump has promised reciprocal tariffs on India from 2 April (India Today), but policymakers here seem confident about avoiding any negative effects. That is because there is "A deep pessimism that Indian manufacturing will never be productive and efficient enough to compete on its own terms," and "may never be able to produce things more cheaply or with consistently higher quality than its peers," wrote Mihir Sharma. So, the hope is that Trump's tariffs will act "as an equalizer for its producers when compared to the rest of the emerging world." "According to the IMF, in 2024, India ranked 142nd out of approximately 190 countries, with a nominal per capita GDP of $2,700." And yet, "With 200 billionaires in 2024, according to Forbes magazine, India ranks third globally in its billionaire count." However, more than 50% of billionaires in India are from established business families and have inherited their wealth, not self made, wrote Arjun Jayadev & Advait Moharir. The greatest aspiration for 'Aspirational Young India' is to get a "government job, a coveted position of stability and security." "For a cohort not yet 30, an alarmingly large number reported fatigue, sleep issues, vitamin deficiencies, anxiety and mental health concerns, difficult menstrual health and debilitating hormonal fluctuations," wrote Mathangi Krishnamurthy & Rama Bijapurkar. However, they blamed their own lack of exercise or failure to stay healthy, showing a lack of faith or hope in the system. "India's latest trade data,..reinforces that the country's share in global merchandise exports continues to remain below what it was at the time of Independence, nearly 80 years ago. Overall, India's share in global goods exports has remained below 2% since 1950." The Print. "India's parallel economy gets a bad name." But Shankar Sharma says, "I love it. It's fantastic." "It keeps us afloat. It's how India weathers most global economic crises better than others - because the parallel economy does not fall as much as the real economy." BT. It also means that our vaunted moniker of the "fastest growing economy" is essentially based on 'jugaad', a 'quick fix' or 'hack' (blogs.lse) forced by a lack of money and resources. Doubled GDP and 200 billionaires resting on the jugaad of hundreds of millions in the parallel economy. No wonder they are not worried about Trump's tariffs. Even Trump can't tax nothing. Can he?