India Can Absorb US Tariff Shock Within A Year, Says Former Commerce Secretary Ajay Dua

India is facing collateral damage due to the sudden tariff hike imposed by the United States, but the impact can be managed after a temporary disruption, according to former Commerce Secretary Ajay Dua. Highlighting India’s domestic-driven economy, he said that the country can adapt within six to 12 months to the impact while dealing with short-term disruptions.

“It is not something that we can't handle or overcome. We are not really an export-dependent country. Our domestic consumption forms 60% of the GDP. Yes, so there would be an impact in the short term for people working in these export ventures, but we can…….I think within a fairly reasonable time, six months to a year, get used to not being hurt, but finding relief measures for all of them,” Dua said in an interview with NDTV Profit on Wednesday.  

His remarks followed as Donald Trump imposed additional 25% tariffs on India came into effect on Wednesday, taking the total tariff on Indian exports to 50%, the highest for any country after Brazil.

Dua framed the tariff hike as a fallout of broader geopolitical tensions, specifically the Russia-Ukraine conflict. He suggested that India is facing collateral damage. 

“The 25% we had been expecting tariffs for some time, ever since we found our bilateral trade agreement discussions were not getting off the ground. This additional 25% is really not of our own making. It is entirely between Russia and the US and the cause being, as we all know,the  settlement of the Ukraine dispute. We've got collateral damage in it and I do hope that this additional 25%.......we would get some relief from the United States,” he noted.

Dua also praised New Delhi’s measured response to the tariffs and called it nuanced and mature. He emphasised the importance of staying engaged while avoiding provocation. According to him, there are three ways in which India can diplomatically offer symbolic relief to Trump.

“We are not there to rupture relations with anyone. I think we should look at this as I won't call it a passing phase to be ignored. But that this shall improve….things will change. Number two, I think we could give President Trump some kind of relief, as he's very, very prone to flattery. Why not assure him that we will buy as much oil from the US as we would buy from Russia, but the open market will decide what the price is,” he explained.

According to Dua, another solution is to maintain flexibility in allowing higher US imports of non-food agricultural items like apples and nuts. He argued they won’t significantly hurt India’s small farmers, since horticulture is “mostly practiced by mid-to-large” producers.

“And finally, to give sector-specific relief to industry in India. We are currently considering modifications or improvements to the GST scheme. In that context, I think we could look at waiving special category GST temporarily for export-oriented sectors such as gems and jewellery. This is just an off-the-cuff remark, but it comes from my understanding that diamond workers in Surat are being laid off in large numbers. So, we need to think of relief measures for each industry,” he added.