By Sanskriti Global Exports by Himanshu Gupta

Trumping US Tariffs: Strategies for Indian Exporters

The ongoing trade tensions between India and the US, punctuated by periodic tariff impositions, present a significant challenge to Indian businesses engaged in import and export. While the impact of tariffs is undeniable, a closer examination reveals that India's competitiveness isn't solely determined by external factors. Internal inefficiencies, particularly high logistics costs and cumbersome internal trade barriers, significantly amplify the negative effects of US tariffs. A recent Financial Times article highlighted these internal impediments as major obstacles to India's global competitiveness. This article delves deeper into these issues, examining their implications for Indian import-export professionals and outlining potential strategies to mitigate their impact.

Factual Summary: India's Internal Trade Barriers

The Financial Times article points to high logistics costs as a primary impediment to India's economic growth and export competitiveness. These costs, significantly higher than in many other countries, inflate the final price of Indian goods, making them less attractive in the global market, particularly when facing US tariffs. The article argues that these high costs aren't solely due to global fuel prices or port congestion; rather, a significant portion stems from India's internal trade barriers. These barriers include cumbersome regulations, inefficient infrastructure, and a lack of standardization across states, leading to delays, increased paperwork, and added expenses for businesses.

The article underscores that easing these internal barriers would be a pivotal step in boosting India's export prowess. By streamlining processes, improving infrastructure, and promoting standardization, Indian businesses could achieve significant cost reductions. This, in turn, would allow them to better absorb the impact of US tariffs and compete more effectively on the global stage. The article implicitly suggests a shift in focus from solely reacting to external trade policies to proactively addressing internal inefficiencies as a fundamental prerequisite for enhanced global competitiveness.

Implications for Indian Import-Export Professionals

• Increased Costs and Reduced Profit Margins: High logistics costs and internal trade barriers directly translate into increased operational expenses for Indian businesses. This eats into profit margins, making it harder to compete on price, particularly in price-sensitive markets.
• Loss of Market Share: The combined effect of US tariffs and high internal costs can lead to a loss of market share to competitors from other countries with lower production and logistics costs. This is especially true for products where price is a primary factor.
• Difficulty in Attracting Foreign Investment: The perception of a complex and inefficient business environment, characterized by high internal trade barriers, can deter foreign investment, limiting the potential for growth and expansion within the import-export sector.
• Need for Strategic Diversification: Reliance on markets heavily impacted by US tariffs necessitates exploring alternative markets and diversifying export destinations to reduce vulnerability to trade disputes.
• Investment in Technology and Process Optimization: Embracing technological advancements in supply chain management, logistics, and documentation can significantly reduce costs and streamline operations. This includes exploring digital platforms and automation solutions.
• Advocacy for Policy Reforms: Indian import-export businesses need to actively participate in advocating for policy reforms that address the issues of high logistics costs and internal trade barriers. This includes lobbying for improvements in infrastructure, streamlining regulations, and promoting greater standardization across states.
• Focus on Value Addition: To counter the impact of tariffs and higher costs, Indian businesses should focus on value addition, creating specialized or higher-quality products that can command premium prices, thus offsetting the cost disadvantages.
• Strengthening Supply Chain Resilience: Building more robust and diversified supply chains helps mitigate risks associated with disruptions due to trade disputes or other unforeseen events. This includes exploring sourcing alternatives and strengthening relationships with suppliers.

Conclusion

While US tariffs represent a significant challenge, they shouldn't be perceived as insurmountable. The Financial Times article correctly points towards a crucial internal factor that needs to be addressed: the high cost of logistics and the presence of cumbersome internal trade barriers. By proactively tackling these internal inefficiencies, Indian import-export professionals can significantly enhance their competitiveness. This requires a multi-pronged strategy encompassing technological advancements, policy advocacy, supply chain diversification, and a focus on value addition. Only by addressing both external trade policies and internal structural issues can India truly 'trump' the impact of US tariffs and solidify its position in the global market.

Source: Original