Tariff Crisis and Breathless Hopes for Reforms

In India's political economy, change is defined by Newton's laws of physics.

- SHANKKAR AIYAR

The inertia, the strong political consensus for weak reforms, is dislodged only by external force. As chronicled in my book Accidental India, the transformation of India from penury to prosperity came in the wake of change propelled by a series of crises.

India is at the cusp of a carpe diem moment. Trumponomics has upended the global economy into a crisis. The confounding tactics of US President Donald J. Trump could well be the Newtonian external force. There is a rising chorus that India must not waste the crisis. The question is what can and must be done.

The need is to move beyond motherhood and apple pie, postpone the yen for big-bang reforms and dollarize change by addressing the friction holding back India. The crux should be to look at the processes, the entrenched inefficiencies which make India uncompetitive and the costs these impose on the economy.

The trouble with the design of reforms is that, often, governments dilute the call for essential freedoms into deemed concessions. While the focus is on the Centre, the bulk of next-gen reforms are with the states, which control factors of productivity. The Economic Survey of 2024-25 lists critical areas—land, construction, labour, utilities and logistics—where the states control standards and permits, and impose rules and penalties. These mandates are stranded in the past.