NEW DELHI: The ongoing US-China trade war presents both challenges and opportunities for India, according to a report released by the government think tank Niti Aayog on Wednesday. The report emphasized the need to enhance domestic manufacturing capabilities, especially in high-tech industries, to capitalize on shifting global supply chains. However, it acknowledged that India has struggled to fully leverage the “China plus one” strategy, as countries like Vietnam, Thailand, Cambodia, and Malaysia have reaped more benefits.
The US has imposed stricter export controls and tariffs on Chinese goods to curtail China’s technological advancements, leading to a fragmentation of global supply chains. This has prompted multinational companies to seek manufacturing alternatives outside China, creating potential opportunities for India.
Strategic Opportunities Amid Disruption
B.V.R. Subrahmanyam, CEO of Niti Aayog, highlighted the strategic opportunities during the launch of the inaugural edition of the think tank’s Trade Watch quarterly report, a key input for evidence-based policymaking.
“The disruptions caused by these geopolitical shifts are immense, but so are the opportunities. We are like a fielder at first slip—the ball is coming our way. Whether we hold or drop the catch is up to us.”
Challenges for Indian Steel Industry
The report also warned of significant challenges, particularly for India’s iron and steel sector, which faces substantial exposure to the European Union’s proposed Carbon Border Adjustment Mechanism (CBAM). The sector, which accounts for 23.5% of India’s exports to the EU, could face tariffs of 20-35%, raising production costs, reducing competitiveness, and lowering demand in the EU market. Compliance costs will rise due to the need for detailed emissions reporting.
Aligning Trade with Sustainability
In light of global geopolitical shifts and increased focus on sustainability, the report stressed the importance of aligning India’s trade policies with environmental goals.
“India must implement coherent policy measures that balance trade objectives with global sustainability trends,” the report noted.
Conclusion
While the US-China trade war presents significant risks, it also offers India a chance to strengthen its position in global supply chains. To seize these opportunities, India must enhance its manufacturing capacity, address environmental concerns, and implement strategic trade policies that align with evolving global dynamics.
