The Arjuna Moment For Electronics

In its trade negotiations with US, India will do well to draw lessons from Japan's rise and decline in semiconductors to maintain its trajectory in electronics manufacturing

- RISHI RAJ

INDIA STANDS AT a crucial juncture in its economic, trade, and strategic relations with the US. President Donald Trump's key demand is reduction in tariffs, and he has consistently maintained that India charges US massive tariffs, due to which the latter can't sell anything here. Over the weekend he claimed that India has agreed to cut its tariffs way down now because he has exposed it. Trump is not known for diplomatic niceties. He made these comments when commerce and industry minister Piyush Goyal was in the US to work out the contours of a bilateral deal. His statement also came at a time US commerce secretary Howard Lutnick sought a "grand deal" with India on a broad scale and not product by product.

While it's true that dealing with Trump is no picnic, India needs to be mindful of the fact that it cannot risk the recent gains it has made in a sector like electronics where it aims to become a part of the global value chain (GVC). With Trump announcing tariffs on China, Vietnam is already positioning itself as an alternative manufacturing hub, particularly in electronics. And average tariffs there are nearly half of India's. If India seizes the opportunity, it could be transformative, akin to the liberalization of 1991. The challenge, however, will be to navigate Trump's diplomatic bluntness which may complicate the optics at home.

Whatever may be the compulsions, can India afford to risk the opportunities in electronics at this stage? International historian Chris Miller's masterly book, Chip War, provides some insights, particularly with respect to Japan's rise as a semiconductor power aided by the US and subsequent decline.