Written by: Niharika Yadav
5 min readApr 2, 2025 01:06 PM IST
First published on: Apr 2, 2025 at 12:49 PM IST
India faces an increasingly daunting growth challenge in a difficult global environment. Despite the difficulties abroad, including Donald Trump’s looming reciprocal US tariffs on India, it is worth emphasising the role of internationalisation, which brought India its most potent period of growth between 1991 and 2011. In this context, attention should be paid to the knotty problems of India’s economic statecraft vis-à-vis China.
Both economic and security interests have pushed Indian policymakers to rely on protectionist measures to counter Chinese imports and supply-chain vulnerabilities. However, these restrictions have spread far beyond their optimal use. We are seeing a sharp surge in broad-brush restrictive measures and enforcement actions, causing supply-chain disruptions for global firms in India and unsettling foreign investors. This risks setting India on a precarious path and reinforcing its historical reputation for protectionism. Global firms are sounding an alarm, and it is critical that the government listens. The China challenge requires a more sophisticated approach to trade barriers — one that is narrowly targeted, precise, and backed by a commitment to economic discipline.
While there is high-level agreement in India on the need for global integration, the bureaucracy has introduced several tariff and non-tariff measures that cast a protectionist net, beyond the narrow restrictions needed for the China challenge. For instance, the scope of Quality Control Orders (QCOs) has expanded significantly, covering over 730 products in 2024, up from 300 products in 2020, and causing unintended disruptions for local textile and footwear manufacturers. Companies experience delays in raw material supplies due to prolonged quality certification processes and inspection visits. Experts argue that this is hindering India’s trade competitiveness.
The government has also struggled to deploy trade defence tools, such as anti-dumping investigations, with precision. In 2023, for instance, India ranked second in the world in initiating and imposing anti-dumping duties among World Trade Organisation members. Most recently, several global IT hardware firms and automakers faced supply-chain disruptions and heightened costs due to the 30 per cent anti-dumping duty imposed on bare printed circuit boards (PCBs) imported from China. It is ironic that Indian manufacturers, who initiated complaints against the dumping of Chinese PCBs, struggle to produce high-end PCBs at quality and safety levels required by global firms. This episode has rendered several firms uncompetitive in global markets, including US firms participating in Indian production-linked incentive (PLI) schemes that mandate local PCB assembly. Meanwhile, there is limited research into the effectiveness of QCOs and duties in curbing Chinese imports, especially in light of the recorded increase (~10.6 percent) in the inflow of Chinese goods to India in 2024.
Blunt trade restrictions also bring uncertainty in policy environments. The government’s wavering stance on import restrictions on laptops and IT hardware imports – oscillating between measures such as licensing systems or import quotas – has made firms wary of making investments and supply-chain decisions. This has the potential to delay capital allocation and hinder India’s manufacturing ambitions.
Trade restrictions against China — whether for security reasons or in response to Chinese macroeconomic imbalances — require intelligent trade barriers. This includes an institutional framework (that is, an impersonal framework) that delivers precise restrictions as a limited tool, embedded in a larger strategic philosophy of globalisation, economic freedom and the rule of law. The policy process needs to embrace self-correcting feedback loops of action, review, and correction. This requires high-state capability, augmented by extensive research and industry consultation. This can further include resource commitment to procure research evidence on the success and failure rates of interventions from independent economic research organisations; study of precise import restrictions and their impact on supply chain continuity for domestic sectors such as IT hardware; phased implementation of duties and planning for calibrated rollback to prevent rent-seeking and latency from artificial market advantages.
Also important are necessary exemptions from restrictions for high-end components, alongside complementary efforts in securing bilateral trade agreements to ensure alternative sources of imports; clear, predictable enforcement and tax policies, not wielded as broad-brush policy instruments that may undermine business confidence and rule of law. Fair and non-partisan anti-dumping investigations, maintaining transparency and independence from industry lobbies and the judicious use of QCOs, complemented by capacity building in testing infrastructure, and adaptive standards (with periodic reviews) are also crucial factors.
The post-Donald Trump world will require India to make certain concessions on the trade front. This presents an opportunity to address the effects of its restrictive trade policies, particularly those implemented under its China strategy. India has a chance to avoid repeating the mistakes of the license raj — an excessive emphasis on import substitution at the expense of competitiveness. Ultimately, openness and a liberal trade regime should remain India’s guiding principles. Striking the right balance between strategic protections and market-driven competitiveness will be key to sustaining long-term economic growth.
The writer is a policy associate at The Asia Group
Attention should be paid to the knotty problems of India’s economic statecraft vis-à-vis China.
(Photo: AP/ File Photo) 
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