Hard-hit export sectors need govt support: Icrier

NEW DELHI: While estimating that nearly 70% of India's exports are exposed to Trump's 50% tariffs, think tank Icrier has suggested govt support for hard-hit sectors, such as textiles and gems and jewellery, along with sharp duty cuts in non-sensitive farm goods and addressing US demands on genetically modified products.

The recommendations on farm goods fly against the stand taken by govt in negotiations with the US, even though the paper maintained that India should not buckle under pressure.

"The US remains too large and too important to write off, especially as India advances trade deals with the UK and EU. Instead, India must work to re-engage the US with smart, tactical negotiation, next rounds of which are scheduled this month-end. The key sticking point has always been agriculture. US demands on GM products should be addressed on the basis of science rather than ideology," said a paper by economists Ashok Gulati, Sulakshana Rao and Tanay Suntwal.

It suggested that GM corn can be used for ethanol blending or poultry feed, while pointing out that India did not allow GM soya but imported it in the form of soya oil.

It also proposed steep duty cuts for agricultural products, especially those that are not sensitive and with low domestic production, such as walnuts (120% tariff), cranberries and blueberries and breakfast cereals. Even in the case of dairy, the paper has argued for tariff rate quota to allow certain quantities at lower duty, while imposing "prohibitive tariffs" beyond that.

Further it said: "On dairy, India could explore a certification system - similar to halal - that assures buyers the cattle are non-meat fed or pasture-grazed." Citing items with over 50% customs duty in India, the economists have made a case for "reforms", arguing that "high protectionist tariffs breed inefficiency".

"The fact is India needs major reforms in rationalising its import duties, irrespective of Trump's pressures. Rather than shielding agriculture with blanket protections, India should invest in R&D, improve supply chain efficiency and modernise infrastructure reforms on the scale of the 1991 liberalisation. This adversity should be converted to an opportunity through domestic reforms and India must focus on innovations, high productivity and R&D to enhance our export competitive strength, globally," the paper said.

Overall, it said, due to tariffs in the US, agriculture stands to face smaller losses compared to other sectors, although semi-milled rice will have to compete with produce from Thailand and Pakistan. Similarly, herbal and nutraceutical exports face disadvantages. Arguing that the tariff gap with competing countries is too large in the case of textiles and apparel, the paper made a case for "targeted, time-bound support through subsidies, rebates or incentives to bridge the gap and keep orders flowing.

In case of shrimps it said there was a possibility of loss of orders in short-term, which will impact producers in Andhra Pradesh, West Bengal and Odisha. It has also called for reducing dependence on the US and suggested that the trade deal with the UK and European Union and other countries must be advanced.

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