India's Overlooked Vulnerabilities

United States President Donald Trump's angry outburst and the immediate application of 25 percent tariffs on all goods from India have once again brought into focus our economic vulnerabilities, despite being the fourth-largest economy in the world.

- PROSENJIT DATTA

But the Trump tariff tantrums also tend to divert attention from two other threats to the Indian economy that briefly caught some media attention.

The first involved China putting the brakes on rare earth and rare earth magnets exports, which have thrown our automobile industry in a tizzy. The second was the sudden denial of services by Microsoft to Nayara Energy, 49 percent owned by Russia's Rosneft, ostensibly because the EU has sanctioned Russia and its companies. Nayara Energy, which bought and operates the erstwhile Essar Refinery in Vadinar, Gujarat, also operates over 6,500 petrol pumps in India. Microsoft backed down and restored services once Nayara filed a case against them in India, but the event did bring into the spotlight one of our economic vulnerabilities—our sheer dependence on the US and others in many key areas.

While our vulnerability to oil shocks is well known, other vulnerabilities often get less attention. Take, for example, our dependence on China for critical raw material supplies—such as electronic chips, active pharmaceutical ingredients (APIs), and rare earths, as well as minerals such as lithium and cobalt. Our weakness in new emerging technology areas such as artificial intelligence models, apart from our dependence on US companies for the operating system and data center services like Amazon Web Services (AWS) and Microsoft Azure, are also areas we need to address as a rapidly growing economic power.