India Must Respond to Trump's Tariffs With a New Set of Reforms

New Delhi must neither yield to the political demands of the US nor indulge in knee-jerk responses

- NITIN PAI

The Indian economy is resilient. It will absorb the shock of Donald Trump's tariffs and plough on. Like a river that eventually flows into the sea, the economy will respond to the sudden obstacle by changing course and springing new distributaries. As I have written in these pages before, India's size, diversity, demographics and popular expectations drive its growth. A dip in trade with the United States might shave up to half a percentage point off India's growth rate this year. This is smaller than how much a bad monsoon affects India's economic output.

India must not concede to President Trump's political demands. To do so would allow the proverbial camel to enter the tent. Instead, New Delhi should keep its negotiating lines open, be ready to find new common ground and build mutually beneficial options in both the geo-economic and geopolitical domains. In the meantime, we should be prepared to bear some pain. As Trump's policies run through the US economy, the US-China contest unfolds and crises in Eastern Europe as well as West Asia throw up new realities, it is likely that Washington will rediscover the reasons for better relations with India. That will be a good time to make deals. How long will this take? Maybe a year. What if it doesn't happen? If we discover that the pain is more than we can bear, we could still make some concessions that Washington demands.