The Reserve Bank of India released the minutes of the October Monetary Policy Committee Meeting on Wednesday. Dr Nagesh Kumar, one of the members of the Committee warned said the Trump Administration has delivered a comprehensive "assault" on India with successive announcements over the past few weeks.
"There are also other measures, including the proposed HIRE Act on outsourcing, the 100% tax on patented pharmaceuticals, among others which may affect India’s economic prospects."
The trade policy measures adopted by the US, India’s biggest trade partner and biggest market for exports of goods and services, pose challenges for the economy he added.
"While the effect on the economic growth rate may be limited to between 40-60 bps, a larger effect is expected on MSMEs and jobs. This is because the US is a much more important market for our labour-intensive goods than for all imports. The US accounts for nearly 20% of India’s merchandise exports, but our exposure to the US market is far greater at 33% for labour-intensive goods such as textiles and garments, leather goods, gems & jewellery, processed food products like shrimp."
These are also the sectors that are dominated by MSMEs and account for a disproportionately larger share (around 40%) of jobs in the manufacturing sector, he said. "Therefore, high penal tariffs imposed by the US on India have the prospect of affecting MSMEs and the jobs in a significant manner."
"There are also other measures, including the proposed HIRE Act on outsourcing, the 100% tax on patented pharmaceuticals, among others which may affect India’s economic prospects."
The trade policy measures adopted by the US, India’s biggest trade partner and biggest market for exports of goods and services, pose challenges for the economy he added.
"While the effect on the economic growth rate may be limited to between 40-60 bps, a larger effect is expected on MSMEs and jobs. This is because the US is a much more important market for our labour-intensive goods than for all imports. The US accounts for nearly 20% of India’s merchandise exports, but our exposure to the US market is far greater at 33% for labour-intensive goods such as textiles and garments, leather goods, gems & jewellery, processed food products like shrimp."
These are also the sectors that are dominated by MSMEs and account for a disproportionately larger share (around 40%) of jobs in the manufacturing sector, he said. "Therefore, high penal tariffs imposed by the US on India have the prospect of affecting MSMEs and the jobs in a significant manner."
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