Many economists argue that a decade of protectionist policies has undercut Prime Minister Narendra Modi’s Make in India initiative, which focused on capital and technology-intensive sectors while sidelining labour-intensive industries like textiles. As a result, the programme has struggled to deliver meaningful gains in manufacturing and exports.

“If foreigners cannot sell their goods to us, they will not have the revenues to pay for the goods they buy from us. If we cut back on their goods, they will have to cut back on ours,” Prof Panagariya wrote.

Such protectionism has also led to allegations of cronyism.

“Tariffs have created protectionism in several Indian industries, disincentivising investments in efficiency by cosy incumbents and allowing them to steadily garner market power by building up concentrated positions,” according to Viral Acharya, a professor of economics at New York University Stern School of Business.

With the US turning inward and China under pressure, countries belonging to the European Union are scrambling for reliable trade partners – and India could be one of them. To seize this moment, economists believe India must lower its tariffs, boost export competitiveness and signal its openness to global trade.

Sectors like garments, textiles and toys present a golden opportunity, especially for the medium and small-scale sectors. But after a decade of stagnation, the big question is: can they scale up – and will the government back them?

If Trump follows through on his tariff plans after the current pause, India could see a $7.76bn – or 6.4% – drop in exports to the US this year, according to an estimate by Global Trade Research Initiative (GTRI), a Delhi-based think tank. (In 2024, India exported $89bn worth of goods to the American market.)

“The Trump tariffs are expected to deliver a mild blow to India’s merchandise exports to the US,” says Ajay Srivastava of GTRI.

He emphasises the need for India to broaden its trade base after securing a balanced deal with the US. This includes fast-tracking agreements with the EU, UK and Canada, while deepening ties with China, Russia, Japan, South Korea, and Asean.

At home, real impact hinges on reforms: simpler tariffs, a smoother goods and services tax (GST), better trade processes and fair implementation of quality controls. Without these, India risks missing the global moment.

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