12 April 2025 : Indian Express Editorial Analysis

1. A second 1991 moment

(Source – Indian Express, Section – The Editorial Page – Page No. – 14)

 The Uncertainty of Trump Tariffs

• The article opens by expressing skepticism about anyone claiming to fully understand the implications and trajectory of Trump Tariffs (TT).
• Despite this uncertainty, the need to interpret their impact remains crucial.
• The suggestion is that TT represents a shift in global economic order, rather than just a short-term economic policy maneuver.
• The opaque nature of these tariffs is underscored by their sudden and sweeping application, initially framed as reciprocal but later revealing a deeper geopolitical strategy.

Beyond Economics: The Political Intent of TT

• The core argument is that TT is not rooted in conventional economic thinking, such as correcting trade imbalances.
• Instead, it is portrayed as a response to China’s long-term strategy to unseat the U.S. as the global economic leader.
• The article points out that China’s ambition is not subtle or secret—it is a calculated, long-duration effort to establish global hegemony using its population and a strict mercantilist model as levers.

China’s Mercantilist Success Story

• A deeper dive into China’s economic philosophy highlights its adherence to mercantilism—favoring exports, discouraging imports, and accumulating reserves.
• The data provided is compelling: in 2010, China’s consumption-to-GDP ratio stood at a mere 35%, showcasing how export-oriented its economy was.
• Over the decades, China’s share of global manufactured goods exports surged from 4% in 1996 to 30% today.
• This sharp rise underlines the effectiveness of China’s approach, especially in contrast to a post-WWII U.S. that had once dominated global manufacturing.

U.S. Reaction: Bipartisan Continuity and Escalation

• Trump’s tariffs found bipartisan support in the U.S., reflecting a rare consensus on countering China’s rise.
• Interestingly, President Biden did not reverse these policies but intensified them.
• April 2, dubbed “Liberation Day,” saw the announcement of broad tariffs targeting all countries, but it became clear a week later that China was the real target—with tariffs on Chinese goods soaring to 125%.
• This strategic shift revealed the true intent: to isolate China and curtail its influence.

India’s Liberation: An Unexpected Opportunity

• For India, April 2 marked not a punitive event but a potential turning point.
• The “liberation” referenced is from its own self-imposed constraints—particularly restrictive trade and investment policies.
• Despite strong GDP growth averaging 6.2% over three decades, the country has resisted reforms due to political complacency and comfort with the status quo.
• The article implies that India has underperformed in leveraging foreign investment and integrating into global value chains, unlike other nations that seized on China’s value-chain exodus post-2010.

FDI and India’s Comfort-Driven Policy Paralysis

• India’s declining FDI-to-GDP ratio—from 2-2.5% to below 1%—is attributed to misguided policies like the 2015 model Bilateral Investment Treaty (BIT).
• This treaty discouraged foreign investors by requiring dispute resolution in Indian courts, which are widely viewed as inefficient and unpredictable.
• The assumption that India was so attractive that foreign investors would accept such terms backfired.
• This “comfort” with past growth bred complacency and led to policy stagnation, alienating potential investors.

China’s Exit, India’s Missed Chance

• When China began to move up the value chain after the financial crisis, there was a global opening for other nations to take up lower-end manufacturing.
• Countries like Bangladesh and Vietnam embraced this shift, while India, again due to its policy inertia, did not.
• The article sharply crticizes India’s failure to capitalize on this moment, linking it again to its political and economic comfort zones.

Opposition and Industrial Resistance to Reform

• Adding to the resistance is a fragmented political opposition and powerful domestic industrialists who fear that reforms would introduce competition and erode their entrenched profits.
• Economic reforms carry risk, and the backlash to the 2020-21 farm laws demonstrates the political cost of attempting major structural changes.
• This creates an environment where the government prefers non-economic reforms, which are less controversial and more symbolic.

The Trump Shock as a Reform Catalyst

• Despite the internal barriers, the external shock delivered by TT and the global anti-China realignment offers India a “helplessness excuse” to push through difficult reforms.
• The idea is that India can now frame reform not as a domestic choice, but as a necessity forced by global events.
• In doing so, the political risk is diluted. The West’s need for India as a strategic counterweight to China adds further momentum.

Demographics, AI, and a New Economic Frontier

• India is uniquely positioned demographically, with a growing and increasingly educated workforce, including AI talent.
• In the next few years, India’s prime-age educated workforce is expected to surpass China’s.
• This shift could underpin a transformative leap in India’s economic status, if accompanied by the right policies.
• The West and China are both aware of India’s potential—what remains uncertain is whether India itself recognizes the moment.

A Fork in the Road: Comfort vs. Acceleration

• India stands at a critical crossroads. One path maintains the current 6.2% growth, driven by inertia and cautious policies.
• The other promises accelerated growth of 7.5–8.5% through bold reforms in trade and FDI.
• The metaphor “comfort kills reform” serves as a stark warning. Without disruption, complacency will prevail.

A New 1991 Moment on the Horizon

• The article concludes on a hopeful note. With India and the U.S. nearing a Bilateral Trade Agreement (BTA), and similar negotiations underway with the UK and EU, the stage is set for a second 1991 moment—a reference to the transformative liberalization India underwent in the early 1990s.
• The article is optimistic that this time, India will seize the opportunity.

Read more – 11 April 2025 : Indian Express Editorial Analysis