 |
|
Anand Mahindra, Chairman of the Mahindra Group, has urged India to capitalize on the opportunities arising from the “unintended consequences” of US President Donald Trump's tariffs. He argues that India needs to move beyond incremental reforms to radically improve its ease of doing business, thereby becoming an irresistible destination for global capital. Mahindra's remarks are particularly pertinent in light of the recent escalation of tariffs by the US, specifically targeting India with an additional 25 percent duty, subsequently doubled to 50 percent, on Indian goods due to New Delhi's continued imports of Russian oil. This move has been condemned by India as unfair, unjustified, and unreasonable, with sectors like textiles, marine, and leather exports expected to bear the brunt of the impact. The imposition of the highest US tariff of 50 percent alongside Brazil singles out India and underscores the urgency for strategic action. Mahindra contends that the "law of unintended consequences" is at play in the ongoing tariff war and presents a unique opportunity for India to shape a virtuous consequence for itself. He poses the question of whether India can seize this moment, drawing parallels to the 1991 forex reserves crisis that triggered liberalisation, asking if today's global 'Manthan' over tariffs can yield some 'Amrit' for India. Mahindra proposes two strong steps that India can take immediately. First, he emphasizes the need to radically improve the ease of doing business. This involves moving beyond incremental reforms and creating a genuinely effective single-window clearance system for all investment proposals. He acknowledges that while states control many investment regulations, a coalition of willing states aligning with a national single-window platform can be a starting point. By demonstrating speed, simplicity, and predictability, India can become an irresistible destination for global capital in a world seeking trusted partners. Second, Mahindra suggests unleashing the power of tourism as a forex engine. He points out that tourism is one of the most underexploited sources of foreign exchange and employment. To capitalize on this, India needs to dramatically accelerate visa processing, improve tourist facilitation, and build dedicated tourism corridors around existing hotspots, offering assured security, sanitation, and hygiene. These corridors can serve as models of excellence, encouraging other regions to emulate and raise national standards. Furthermore, Mahindra highlights the importance of ensuring liquidity and support for micro, small, and medium enterprises (MSMEs), accelerating infrastructure investment, pushing manufacturing through enhancement and expansion of the scope of Production Linked Incentive (PLI) schemes, and rationalizing import duties so that duty on manufacturing inputs are lowered to improve competitiveness. He advocates for creating intentional and transformative unintended consequences, emphasizing that while it is understandable for nations to prioritize their own interests, India should be motivated to become greater than ever. Mahindra also cites examples of how other countries, like the European Union (EU) and Canada, have responded to similar tariff pressures. The EU, despite seemingly accepting the evolving global tariff regime and responding with strategic adjustments, has been nudged to rethink its security dependence, leading to higher defence spending in France and Germany. This, in turn, has prompted Germany to moderate its fiscal orthodoxy, potentially catalysing a resurgence in Europe's major economies. Similarly, Canada, long hampered by internal trade barriers between its provinces, is now taking steps to dismantle them, bringing the country closer to a common market and enhancing economic resilience. The EU has faced multiple waves of tariffs since Mr Trump reclaimed the White House, including levies on cars, steel, aluminium, and across-the-board tariffs. They previously clinched a deal with the US to resolve a transatlantic tariff stand-off, and further tariffs were placed on Canadian goods. Therefore, Mahindra's perspective is rooted in the belief that challenges posed by tariffs can be turned into opportunities for growth and development, provided that India takes decisive and strategic action.
The core of Mahindra's argument lies in the idea that disruptive events, such as the imposition of tariffs, can act as catalysts for positive change. The 1991 forex reserves crisis, which prompted India to liberalize its economy, serves as a historical precedent. That crisis, born out of necessity, ultimately led to a more open and competitive economy. Mahindra believes that the current situation with US tariffs presents a similar opportunity for India to undertake transformative reforms. The two key areas he identifies – ease of doing business and tourism – are crucial for attracting foreign investment and boosting economic growth. Improving the ease of doing business involves streamlining regulatory processes, reducing bureaucratic hurdles, and creating a more transparent and predictable business environment. The single-window clearance system he proposes is a critical component of this effort. It would allow businesses to obtain all necessary approvals and permits through a single point of contact, rather than having to navigate a complex web of government agencies. This would save time and money for businesses, making India a more attractive destination for investment. The focus on tourism is equally important. India has a vast and diverse range of tourist attractions, from historical monuments and cultural sites to natural landscapes and wildlife sanctuaries. However, the tourism sector has been hampered by various challenges, including inadequate infrastructure, poor sanitation, and security concerns. By improving tourist facilitation, building dedicated tourism corridors, and ensuring security and hygiene, India can unlock the full potential of its tourism sector. This would not only generate foreign exchange and create employment opportunities but also promote India's rich cultural heritage. Mahindra's emphasis on supporting MSMEs is also crucial. MSMEs are the backbone of the Indian economy, contributing significantly to employment and economic growth. However, they often face challenges in accessing finance, technology, and markets. By ensuring liquidity and providing support to MSMEs, the government can help them to overcome these challenges and contribute to India's economic growth. The Production Linked Incentive (PLI) schemes are another important tool for promoting manufacturing. These schemes provide incentives to companies that invest in manufacturing in India, encouraging them to increase production and exports. By expanding the scope of PLI schemes, the government can further boost manufacturing and reduce India's dependence on imports. Finally, Mahindra's call for rationalizing import duties is aimed at improving India's competitiveness. High import duties on manufacturing inputs can increase the cost of production for Indian manufacturers, making it difficult for them to compete with foreign companies. By lowering import duties, the government can reduce the cost of production and improve India's competitiveness.
In essence, Anand Mahindra's advice is a call for India to proactively address its economic challenges and seize the opportunities presented by the changing global landscape. He advocates for a strategic and comprehensive approach that involves improving the ease of doing business, boosting tourism, supporting MSMEs, promoting manufacturing, and rationalizing import duties. His perspective is grounded in the belief that India has the potential to become a major economic power, but it needs to take decisive action to unlock that potential. The key takeaway from Mahindra's advice is the importance of adaptability and resilience in the face of global economic uncertainties. The tariff war unleashed by the US is a disruptive force, but it also presents opportunities for countries that are willing to adapt and innovate. India, with its large and diverse economy, has the potential to not only weather the storm but also emerge stronger and more competitive. However, this requires a concerted effort from the government, businesses, and individuals to embrace reforms, improve efficiency, and foster innovation. Mahindra's call for creating intentional and transformative unintended consequences highlights the importance of strategic thinking and proactive action. Instead of simply reacting to external events, India should strive to shape its own destiny and create a positive future for its citizens. This requires a long-term vision, a commitment to reforms, and a willingness to take risks. The examples of the EU and Canada, cited by Mahindra, illustrate how countries can respond to tariff pressures by strengthening their own economies. The EU's increased defence spending and Germany's moderation of its fiscal orthodoxy demonstrate a willingness to adapt to changing circumstances and invest in future growth. Canada's efforts to dismantle internal trade barriers show a commitment to creating a more integrated and competitive economy. In conclusion, Anand Mahindra's advice to India is a timely and insightful call for action. He urges India to seize the opportunities presented by the US tariffs and undertake transformative reforms to improve its ease of doing business, boost tourism, support MSMEs, promote manufacturing, and rationalize import duties. By embracing these reforms, India can become an irresistible destination for global capital and emerge as a major economic power in the 21st century. The message is clear: India must act now to shape its own destiny and create a brighter future for its citizens. The future is now. The opportunities exist and a robust approach is mandatory.
Source: Anand Mahindra's 2-Point Advice To Tackle Trump's Latest Tariff Bomb