India's chance to rewire industrial reforms amidst tariff turbulence | Opinion

synopsis

By Salonie Chawla: Reciprocal tariffs, at rather ferocious rates by the United States officially kickstarted this Wednesday, April 9, 2025, as part of President Donald Trump’s economic onslaught against the American trade partners.

The 90-day reprieve for all countries but China is a matter of relief. Nonetheless, Trump insists he is correcting what he calls ‘unfair’ trade deficit inflicted upon his country by the rest of the world.   With growing concerns globally around the effects of the US tariffs and the noise around international trade being on life support, the geopolitical sentiment is fast giving to “my country first” way. With China pushing back at the US with retaliatory tariffs, the choice for India may look like to either panic or prepare for trade crisis. However, for India, this may be more of an inflection point — a once-in-a-decade opportunity to rework on its economic model that can attract global businesses even in the midst of no-holds-barred trade conflict which is spilling over, deviously to currency war and share markets volatility.

With American tariffs hitting key Indian exporting sectors — pharmaceuticals, automobile, chemicals, electronics, and even the IT services industry indirectly — the need for Indian industry to redesign itself for resilience is no more matter of choice. During Trump’s first term, the US-China trade war led to shifting of supply chains, with Vietnam, Mexico and India emerging as possible alternatives for global firms. Now, once again, India is being handed that opportunity again — and this time, we can’t afford to miss it. But government alone cannot be expected to all the bidding. The industry must join in.

India Inc. and IT Services Need to Rethink Scale

Tariffs are not just duties on traded commodities. They are signals that indicate where the world is moving — towards caution, control, and confrontation. The current tariff-heavy, protectionist wave is indeed pushing countries like India to rethink not just their trade strategies but the very architecture of their export-led growth models.

For decades, Indian industries, especially IT, relied on being affordable, faster, leveraging young English-speaking graduates and post-graduates from engineering and science colleges.   But that advantage isn’t enough anymore. We need to move from being the back office of the world to being the innovative frontier — designing products, owning IP, building software that powers entire economies. IT firms, especially those dependent on the U.S. market, like Infosys and TCS, need to accelerate their strategies, which can benefit globally as well as locally— building delivery centres, hiring talent, and establishing partnerships in the US. This doesn’t just mitigate risk from potential service tariffs, it also builds goodwill and deepens client relationships. Manufacturing industries could follow suit, using US-based assembly or packaging to qualify as "local content" and avoid higher duties.

Reforming Trade Models

If the world is closing in, Indian businesses must open out — through strategic localisation and diversified exports. “Localize to become more global should be the new strategy: investing in delivery centres, R&D hubs, and small-scale manufacturing in key export markets to bypass tariff barriers. Simultaneously, Indian industry must push aggressively into emerging economies in Southeast Asia, Africa, and Latin America — geographies still hungry for Indian expertise, whether in building roads or writing code.

For IT services, the future lies in value creation, which means pivoting from back-office contracts to becoming transformation partners in AI, cybersecurity, climate tech, and digital infrastructure.

But the Indian industry can only go so far, without real policy and governance reforms at home. Today, it still takes weeks to start a business, months to settle a dispute, and endless paperwork to ship a product out. Every entrepreneur knows the feeling — the grind of compliance, the unpredictability of regulation, the fear of one forgotten form derailing everything.

This is our moment to finally ease the problems of businesses at the ground level. We’ve made progress, no doubt, with Digital Stack, Unified Payments Interface (UPI) and Production Linked Incentive (PLI) — but we need a radical simplification of regulatory touch points, unified labour codes, faster commercial dispute resolution, and port-to-factory logistics that are globally benchmarked.

Local Trade Policy to Mirror Foreign Trade Policy

This geopolitical disruption by the US is a wake-up call for the Indian government to finally deliver on the promise of true ease of doing business. At the heart of this is a question bigger than tariffs: Can the lead firms trust India as a manufacturing partner and a tech hub for innovation. Depending on the sector, firms willing to invest in India, often look at constraints governed b availability of supply inputs, infrastructure, the quality and cost of local labor, regulation and governance.

Additionally, trade diplomacy today is an important geo-strategy. India must approach trade corridors, FTAs, and market access not just as economic levers but as tools of strategic alignment. The India-Middle East-Europe economic corridor, and digital trade frameworks present platforms where India can negotiate from strength — but only if its domestic readiness matches the geopolitical ambition.

The post-pandemic world is erratic, fragmented, and increasingly protectionist. But it is also open to new partnerships and multilateralism. A major tool like tariffs has the power to shake markets and create job crisis, but they also show which countries or governments are nimble, can act with clarity and which businesses are dependable.

For Indian governments, the present times can lead to bolder reforms, as the world rearranges itself and supply chains search for new production homes. The reciprocal tariffs could compel long-overdue reforms in India, renew industrial sentiment, and push the country towards its economic ambitions — not just as a large market, but as a reliable and resilient global partner.

(Salonie Chawla is a senior public policy professional. She can be reached at: salonie.c@gmail.com)