Kotak Mahindra group founder Uday Kotak on Wednesday said the uncertainty of Donald Trump’s tariff regime had created “a sense of urgency for transforming India” and offered “a great opportunity to pivot”.
In an interview with the Financial Times, Kotak said policymakers and businesses should use the trade war to “get focused on productivity, efficiency, excellence and building world-class brands”. “Manufacturing has to play a very important role”, he said, advocating that producers should not focus on India’s large domestic market to avoid the need for “cutting-edge precision”.
“We must think about this as an opportunity for us to get out of our cruise mindset and from a comfort mindset to ‘we are at risk’,” he told the London-based newspaper.
He called for “direct fiscal support” from the government to “turbocharge” small businesses in manufacturing, research and technology. The government should channel more budgetary support to small and medium-sized businesses as the economy grapples with Donald Trump’s punishing tariffs, Kotak told the FT.
India’s economy has come under renewed strain after Donald Trump’s recent move to impose an additional 25 per cent tariff on Indian exports to the US, on top of the earlier 25 per cent “reciprocal” levy. The additional tariffs are linked to India’s continued purchase of discounted Russian oil — a practice Trump claims indirectly supports Russia’s war effort in Ukraine.
Analysts have warned that the dual tariff regime could shave off 0.5 to 0.7 percentage points from India’s GDP growth, making it critical for India to respond with robust internal reforms. These tariffs have woken Indians up to the risks of global dependency and the urgent need to strengthen our domestic ecosystem.
Trade tariff shock, strong fundamentals and the middle income trap
Kotak described the tariffs as a “major shock” that had “woken Indians up” to the economic risks posed by Trump’s trade war.
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According to Kotak, India’s macroeconomic situation is very comfortable. “Our fiscal deficit is under control, our current account is under control, you’ve got macroeconomic stability,” he said. Policymakers and businesses should use the trade war to “get focused on productivity, efficiency, excellence and building world-class brands,” he told the FT.
He said manufacturing has to play a very important role and advocated that producers should not focus on India’s large domestic market to avoid the need for “cutting-edge precision”.
With a per capita GDP of $2,700 — against $13,300 for China and almost $89,000 for the US — India “cannot be in a comfort zone”. “At the current ‘cruise’ level, we’ll keep on improving our position, but is it fast enough for us to get past the middle-income trap? I think there’s a gap,” he was quoted as saying.
The “middle-income trap” refers to a situation where a country achieves a certain level of development but then stagnates, unable to compete with either low-wage economies or high-innovation ones.
© The Indian Express Pvt Ltd
