How Trump 2.0 Could Jeopardise 'Make in India' Initiative
15:01 29.01.2025 (Updated: 17:59 29.01.2025)
© AP Photo / Evan Vucci
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US President Donald Trump's "America First" agenda, especially the threat of imposing tariffs on Indian imports, could present "limited challenges" to the 'Make in India' policy, a prominent industry association told Sputnik India.
US President Donald Trump's threat to impose tariffs on Indian imports, coupled with his demand for increased procurement of American-made security equipment, has sparked legitimate concerns within India.
According to the White House, during a phone call with Prime Minister Narendra Modi on Monday, President Trump urged India to increase its purchases of American weapons and defense systems.
The US readout highlights Trump’s call for "moving toward a fair bilateral trade relationship." Later that day, speaking at a Republican retreat in Florida, Trump warned that his administration would impose tariffs on computer chips, semiconductors, and pharmaceuticals in an effort to bring production of these critical goods back to the US.
"China is a tremendous tariff-maker, and India, Brazil, and so many other countries..We're not going to let that happen any longer, because we're going to put America first," Trump said.
Dr Ajai Sahai, the Director-General and CEO of Federation of Indian Export Organisations (FIEO), told Sputnik India that Trump's America First agenda certainly added a "layer of complexity" to global trade dynamics and posed a challenge to the 'Make in India' policy.
He described the Make in India policy as a "cornerstone of India’s economic strategy", aimed at boosting domestic manufacturing, generating employment, and enhancing the country’s position in the global value chain (GVC).
"While it’s understandable that the US seeks to protect its domestic industries, these policies could pose limited challenges for India, given the scale of our trade relations with the US and different sectors focus in manufacturing in respective countries," remarked Sahai.
He noted that the US was India's largest trading partner and its biggest market, with bilateral goods and services trade reaching a record-level of $190 billion in 2023. According to official statistics, engineering goods, electronics, gems and jewellery as well as pharmaceuticals were India's biggest exports to the US market. The US is the only country among India's major trading partners with which New Delhi enjoys a trade surplus, which stood at just over $41 billion in January-November 2024 period, according to US government figures.
"The US is not only India’s largest export market but also a critical partner in sectors such as defence, pharmaceuticals, and technology. However, the policies being discussed — from potential tariffs to a push for local manufacturing — may create some challenges to India's exports in the short term, especially in sectors like pharmaceuticals, where India is a leading supplier globally," explained Sahai.
However, the FIEO chief expressed hope that even though Trump's policies could a challenge for India, they also presented an opportunity for the South Asian economy to further strengthen the domestic manufacturing ecosystem, diversify export markets, and enhance the competitiveness of Indian products.
"India’s long-term strategy must focus on innovation, quality improvements, and leveraging its vast human capital to continue thriving in the global economy, despite these challenges," Sahai said.
Explaining the India-US defence dynamics, Brigadier (retired) Arun Sahgal, Director, Forum for Strategic Initiatives, noted that US defence exports to India have surged from zero in 2008 to over $20 billion in 2020.
Sahgal told Sputnik India that Trump's push to promote American security equipment would complicate plans for the Make in India in the defence sector.
"Some of Trump's cabinet picks have talked about a spiral strategy, which essentially means building up intrinsic capabilities in the region through off-the-shelf defence deals. In a classic transactional manner, such a strategy would involve the US sitting behind and providing resources to its partners. So, one may envisage a scenario wherein Trump would try to force weapons on us, underplay co-development and co-production," the Indian veteran stated.
Further, he explained that the India-US defence cooperation essentially involved two facets- trade in defence equipment and defence-technological cooperation, which in turn involved co-production in India and the United States–India Initiative on Critical and Emerging Technologies (iCET), a framework unveiled in 2022.
Sahgal suggested that before committing to any future defence deals with the US, India should ensure that the current deals and the iCET initiative were progressing well.
He supposed that the Trump administration could "bait" India to sign up more defence deals with the US if Prime Minister Modi visited the US next month, as disclosed by Trump after his call with Modi. Sahgal said that Trump even might seek to offer the F-35 Fifth Generation Fighter Aircraft (FGFA) to India.
As reported in media previously, Sahgal flagged several issues with the GE414 engine deal between India and the US.
"If we focus on the GE414 engine, there are already delays and the cost has shot up by around 50 percent since the deal was signed. We need these to power our Light Combat Aircraft (LCA) Tejas Mk1A. While India is getting 80 percent transfer of technology (ToT) to build these engine, there are concerns that the upgradation issue is going to come up at some stage," he said.
Further, the expert reckoned that for India, the FE414 engine, manufactured by General Electric (GE), was an "interim" deal and it may have to go to other suppliers for Tejas MK2 and Advanced Medium Combat Aircraft (AMCA) programmes.
"As far as ICET is concerned, we are talking about emerging technologies like AI. The whole idea of collaborating in ICET is co-development of these technologies so that the could be produced in India. In the realm, I am not sure about how far the Trump administration is going to help India, given their own focus on manufacturing in America. So, it is important to look at how the ICET programme, particularly when it comes to co-development, takes off under Trump," Sahgal concluded.
