01 February 2025 : The Hindu Editorial Analysis
1. A note for New Delhi on dealing with ‘Trumperica’
(Source – The Hindu, International Edition – Page No. – 8)
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Trump’s Executive Actions and Initial Signals
- Donald Trump signed multiple executive orders (EOs) immediately after taking office, including revocation orders of Biden-era policies and exit orders from multilateral agreements.
- The White House described these actions as “100s of Executive actions in the first 100 hours to kick off America’s Golden Age.”
- India initially received positive signals, with External Affairs Minister S. Jaishankar attending Trump’s inauguration and holding meetings with U.S. officials.
- However, economic and trade policies under the Trump administration could pose significant challenges for India.
Immigration Crackdown and Its Impact on India
- Trump’s policies focus on border security, stopping illegal migration, and strict visa screening.
- The Immigration and Customs Enforcement (ICE) agency has increased raids and arrests, affecting undocumented Indian migrants.
- Over 7.25 lakh Indians are undocumented in the U.S., and 18,000 Indians are in detention for deportation.
- The economic impact of deportations includes:
- Loss of remittances: If deportations increase, India will face economic losses and rising unemployment.
- Trade pressure: Trump may use tariffs to force India to accept deported migrants, as seen with Colombia.
- Tighter visa rules: Restrictions on H-1B visa holders and work permits for spouses will reduce opportunities for Indian professionals.
Trade Policy and Tariff Weaponization
- Trump’s “America First Trade Policy” will likely bring more tariff-based pressures on trade partners, including India.
- In his first term, Trump withdrew India’s Generalized System of Preferences (GSP) status and stopped oil imports from Iran and Venezuela.
- India may face tougher trade negotiations as Trump prioritizes U.S. economic interests.
- The evolving U.S.-China relationship under Trump adds uncertainty, as Trump’s tariff threats to China are softer than expected.
U.S. Withdrawals from Global Agreements and Their Effect on India
- Trump exited organizations such as the World Health Organization (WHO) and OECD Global Tax Deal and rolled back commitments on climate change and green energy.
- These actions could reduce U.S. funding and support for India’s energy transition and development projects.
Artificial Intelligence (AI) and Its Economic Consequences for India
- Trump’s administration prioritizes AI investments, with a $500 billion Stargate AI Infrastructure project launched.
- AI advancements aim to keep the U.S. ahead in technology and reduce reliance on foreign tech workers.
- AI job replacement risks:
- Tech leaders like Google’s Sundar Pichai say over 25% of new code is AI-generated.
- Meta’s Mark Zuckerberg predicts AI will replace mid-level engineers.
- These changes may reduce demand for Indian tech professionals seeking U.S. jobs.
India’s Response and Future Strategy
- India must rethink its education and skilling policies to absorb impacted STEM graduates.
- New Delhi must factor in Trump’s trade, tech, and immigration policies while engaging diplomatically with the U.S.
- India’s reliance on the IT-BPM sector, which contributes 55% of GDP and 40% of exports, means it must adapt to global shifts in AI and digital industries.
Conclusion
- The Trump administration’s policies on immigration, trade, and AI will significantly impact India’s economy and workforce.
- India must proactively adjust its diplomatic and economic strategies to navigate these changes effectively.
PYQ: How will I2U2 (India, Israel, UAE and USA) grouping transform India’s position in global politics? (150 Words /10 marks) (UPSC CSE (M) GS-2 2022) |
Practice Question: Analyze the implications of the Trump administration’s immigration and trade policies on India’s economy and workforce. What measures should India adopt to mitigate these challenges? (250 Words /15 marks) |
2. The Economic Survey sets out challenges to India’s growth
(Source – The Hindu, International Edition – Page No. – 8)
Topic: GS3 – Indian Economy |
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Introduction
- The Budget session of Parliament has begun at a time when India’s economic growth is slowing down after four years of steady post-pandemic recovery.
- Stock markets are declining, the rupee is weakening faster than expected, and key drivers of economic growth, such as domestic demand and public sector capital expenditure, are losing momentum.
Investment Trends Over the Last Five Years
- From 2019-20 to 2023-24, government capital expenditure (capex) grew at a compounded annual growth rate (CAGR) of 16%.
- Household investments increased by 12%, while corporate investments lagged behind at just 6%, despite a significant corporate tax rate reduction.
- The slowdown in economic growth drivers is a major concern, especially since private investments remain weak.
Global Economic Uncertainty and its Impact on India
- The new U.S. administration appears determined to change global trade and taxation policies, which adds to economic uncertainty for India.
- The Economic Survey 2024-25 has warned that with globalization in retreat, India must focus on domestic factors to drive economic growth and remain competitive in attracting foreign investors.
GDP Growth Projections and Concerns
- The Economic Survey projects that India’s real GDP growth for 2025-26 may be between 6.3% to 6.8%, slightly lower than the 6.4% estimate for 2024-25.
- The Survey states that for India to achieve its goal of becoming a developed nation by 2047, the economy must grow at 8% annually for at least a decade.
- A “business as usual” approach could lead to economic stagnation, making significant reforms essential.
Need for Economic Deregulation and Reform
- While recent economic reforms have been praised, the Economic Survey stresses that they will not yield the desired results unless regulations are reduced.
- The government is advised to minimize unnecessary regulations and reduce micro-management of businesses.
- There is a call to bridge the trust deficit between the government and citizens, and within business communities.
Ease of Doing Business and Market Reforms
- The Economic Survey suggests that the government should focus on improving the ease of doing business by reducing market distortions caused by excessive controls.
- The report emphasizes the need for a “minimum necessary, maximum feasible” approach to regulations.
- It also suggests that regulators should be held accountable, just as they expect businesses to comply with regulations.
Empowering Small Businesses and Economic Freedom
- The Survey highlights the importance of empowering small businesses and ensuring economic freedom with a level-playing field for all enterprises.
- It criticizes some of the government’s recent policy decisions, such as import restrictions, production-linked incentives (PLI), and unpredictable taxation measures, which resemble 1970s-style economic policies.
Conclusion – Key Takeaway for the Budget
- The Economic Survey provides clear advice to the government: reduce unnecessary controls, trust businesses, and focus on long-term economic freedom.
- Whether the government will listen and implement these recommendations will be revealed in the upcoming Budget.
Practice Question: How can deregulation and economic freedom enhance India’s investment climate and long-term growth prospects? Suggest policy measures to balance regulation with economic efficiency. (250 Words /15 marks) |
For more such UPSC related Current Affairs, Check Out –31 January 2025 : The Hindu Editorial Analysis