It is not a cliché to say that our powerful Prime Minister Narendra Modi’s moment truth has arrived after 11 years of ruling the country as the unchallenged leader. The 25 per cent tariff hike on Indian exports announced by the United States President Donald Trump on Wednesday and taking effect from Friday, August 1 is not just a trade decision, it has much more to do with the maverick President’s fresh approach to his once good friend Modi, his tariff being used as the driver of the geopolitics and the establishment of the Trump doctrine that those who are not with us are against us.
For Narendra Modi, the state of India- US relations has never been at such a lower level during his PM tenure beginning 2014. Trump, known for his feisty ways, continuous changing stands and always exaggerating his role, has hurled maximum insult to India and to his dear friend Narendra Modi who did everything to please Trump during his first term as also in the second non-consecutive term beginning January 20 this year.
Trump was adamant in insulting Modi after the Prime Minister without naming Trump declared in Lok Sabha during Operation Sindoor debate on Tuesday that no foreign leader played any role in the ceasefire between India and Pakistan decided by the two countries on May 10. The next day, Trump again repeated that He took the main role in precipitating ceasefire between India and Pakistan. This was the 30th time, he repeated the same thing. Before Trump, other US leaders also worked from behind in organizing the end of hostilities between the two countries. For instance, the then President Clinton made serious efforts in ending the Kargil war in 1999, but he never claimed any credit for this. Trump is different, He thinks that nothing in global diplomacy moves without him.
The decision on India regarding the high tariff was a result of his personal ego also vis a vis Narendra Modi. The US President was looking for total surrender in trade talks, but Narendra Modi could not afford that on the agricultural products sector, especially milk and dairy. Here Modi’s state interests are highly involved. The dairy and milk industry is the key to the growth of Gujarat and lakhs of farmers form the supporting base of BJP. Prime Minister as a BJP leader could not afford to compromise the economic interest of his party’s supporting base.. The trade talks are still dragging on. Now after this 25 per cent tariff hike on Indian exports, if Indian officials at the instance of the PM change their stand agreeing to the diktat of the US, there might be a deal facilitating the process of lowering the tariff rate from 25 per cent.
Further, Trump’s threat to impose penalty as high as 100 per cent on India for imports from Russia poses a real threat to the balance of payment state of the country since in the last two years, the cheap crude imports from Russia saved a huge amount of foreign exchange helping the government to tame inflation. Now, it is to be seen whether the Prime Minister musters enough courage to continue with the cheap Russian crude oil imports or starts the process of diversifying the imports though the price will be higher and more foreign exchange will be required. In this Russian oil context, Trump has used the undiplomatic language by saying that let both the dead Russian and Indian economies go down. This comes from a sort of hate syndrome because this is untrue. India is not a dead economy. The economy is growing but there are problems of distributive justice and unemployment. Some of the policies are flawed needing course correction, but in global context, India stands out.
Rahul Gandhi through his support to Trump on this dead economy issue has only brought disrepute to the Congress Party. Somebody senior with knowledge of economics must properly guide the Leader of the Opposition. Otherwise, he will not only create problems for the Congress but also harm the cause of INDIA bloc. Narendra Modi is certainly on a backfoot but if he is compelled by circumstances to defy Trump and fight him, the opposition should support him. Narendra Modi is not India, so supporting Indian cause does not mean strengthening Modi
What is most discomforting for India is that India the Prime Minister of which country is considered as the closest among the heads of South Asian nations to the US President, has been charged the maximum tariff rate of 25 per cent. As against India, Pakistan has been charged 19 per cent, Sri Lanka 20 per cent, Bangladesh 20 per cent and Afghanistan 15 per cent. Bangladesh was originally charged 37 per cent, but in the final list, it was charged 20 per cent-17 per cent less. Similarly Pakistan’s original rate was much higher compared to the present 20 percent.
Another important development is to be noted. Trump concluded a deal with Pakistan in a hurry on oil exploration just to spite India. In Pak media, there was no indication of this, nobody knows where are such big reserves and whether those are really worthy of exploration and development. But Trump quipped by saying that perhaps Pakistan would one day sell oil to India.
To be frank, India has not much leverage in the present trade negotiations with the US. US is very adamant on their access to Indian market in agri products, especially dairy. There are historical reasons. US farmers have a strong lobby in the Congress and the White House. The farmer organization leaders decide the fate of the government. This writer was present at the World Trade Organisation ministerial meeting in December 1999 at Seattle in USA..The US President was then Bill Clinton. The meeting collapsed without any declaration as the US and the European Union fought over farmers subsidy issue and no side was ready for a compromise. Clinton was virtually mobbed by the EU negotiators after his address to persuade the US team members to compromise. But Clinton did not listen.
American journalists covering the WTO meeting told me at that time that no US President can win elections by antagonizing the farmers who are most subsidized in US through different schemes though the US government officially denies that in WTO which was active then. The US media people told me after the collapse that the US failed to get its proposal favouring the farmers passed. This will have big impact in the elections next year against the Democrats. Actually, in 2020 presidential elections, the Republican George Bush won and the Democratic Party lost. So Trump also is committed to help his supporting base among the farmers by getting them bigger access to the Indian market of agri products. Narendra Modi must have taken note of this but he has also the same stake in defending his own party base.
Now, what is the emerging scenario? There are two possibilities.. First, through back channel discussions at the level of our PMO and the Trump office, a sort of compromise trade deal is concluded meeting a part of demands of the US side and the PM camp projecting it as a big victory. If that is not possible and the talks collapse, Prime Minister will be facing big choice. He will be attending the Shanghai Cooperation Organisation (SCO) meeting in China on August 31 and September 1.. President Xi Jinping and President Putin will be attending. PM can calibrate his foreign policy and take a more independent stand vis a vis USA.
For the second option, Prime Minister will have to decide immediately on India’s stand on QUAD which has four members USA, India, Australia and Japan. India is the host of the summit in 2025. Trump is scheduled to visit India during the summit later this year. If the India-US relations continue this way and Trump’s hostile attitude remains, what will be the impact of this on Narendra Modi and his tackling of QUAD summit?- That is a major issue.. Trump has attacked BRICS members. India is a member of BRICS. How is our Prime Minister going to react to that? All these are relevant issues which the PM will have to deal with.
For Narendra Modi and the BJP, the best possible scenario will be the first one. If back channel negotiations lead to an understanding between Trump and Modi, Indian Prime Minister will be back again trying to get back his old form and talking of strategic autonomy. Then they will cohabit again for some time at least. (IPA Service)