tariffs and trade: India-US partnership crucial; has potential to offer over 10% annual returns in dollar terms to American investors: KV Subramanian

What can be the future of India-US partnership?
KV Subramanian: India-US partnership could be the the partnership of the next couple of decades given the economic opportunity that India offers to American investors to earn more than 10% returns in a year in dollar terms, not just in rupee terms. This is an opportunity that only a few other large countries can provide. President Trump is very focused on ensuring that the American economy does well. From that perspective, there are paths that clearly converge. I think that this visit would be one where some important steps could be announced.

One area of concern has been the entire talk around tariffs. Now, political rhetoric is one thing, but President Trump has walked the talk when it comes to China, Canada, and Mexico. However, Canada and Mexico are on hold for a month. How serious an impact will this have on India?
KV Subramanian: From the Indian perspective, the recent Budget that was passed took some important steps in this regard. I do not focus just on one aspect of which is basically goods trade and within that tariffs. Ideally the conversation from an Indian perspective needs to be in the form of a two-by-two matrix where you have both goods and services and tariffs and non-tariff barriers as well. Some very good research that has been done by the WTO shows that India for instance uses far less non-tariff barriers. Research shows that non-tariff barriers are more subjective and oftentimes far more opaque as well.

So, this is an aspect that India should be highlighting because some of these non-tariff barriers also affect the comparative advantage that India has on the service sector side. In my opinion, this conversation would be far more beneficial if it is looked at in a more holistic perspective and not just focused on goods trade and that too on tariffs. Rather than that, across this two by two matrix, all the four goods and services and tariff and non-tariff as well, as that is where there can be a lot of common ground in my opinion.

When speaking against BRICS and imposing tariffs on BRICS, Trump was basically responding to a proposal trying to de-dollarize economic transactions. Is that even practically possible in your view?
KV Subramanian: At this point in time, clearly the dollar is the dominant currency and at this point in time on the horizon, one does not see any other currency that can take the place of the dollar. So, the dominance of the dollar in international trade and also from international reserves will continue.