Afghanistan Pakistan Conflict and the USA

The war between Afghanistan and Pakistan at the Durand Line has erupted is attracting the attention of the whole world. However, they have started, it seems that the US has begun implementing its grand plan to seize Bagram Airbase in Afghanistan, which the US vacated on 1 July 2021 after its occupation for 20 years.

The manner in which Pakistan has provoked Afghanistan and initiated unilateral aggression against Afghanistan clearly suggests that Pakistan received orders from US President Donald Trump to do so. Presently, President Trump has been showing his keen interest in Bagram Airbase. Pakistan is trying to please the American President by sacrificing its soldiers.

This conflict will likely drag on for longer than expected, and then, in the name of peace, the US will jump in and seize Bagram Airbase! If it happens in the future, Pakistan will not only fully cooperate with the US in this endeavour but will also put in all its efforts. Afghanistan has been cosying up to India, and it is upsetting for Pakistani establishments. They are not just uncomfortable but want to reverse it as soon as possible. However, at present, post Operation Sindoor, Pakistan is in no position to directly stop India in Afghanistan, so the best option left for it is intervention by the US which wants to get back to Afghanistan through Bagram Airbase.

India must Support Zoho

I have been noticing attacks on Zoho and its founder, Sridhar Vembu, none but by Indian citizens! Why are Indians opposing a homegrown tech company? Earlier, they did the same with Patanjali and Baba Ramdev!

Not for any particular reason, but because both companies got support from the Government of India! The GoI is endorsing them, and they are gaining traction. So, the people in opposition are duty-bound to oppose anything supported by the GoI!

For this group of people, it doesn't matter whether their behaviour hurts the national interests or not. What matters most to them is their high egos and fake feelings of being special!

Deloitte and Unethical Use of Artificial Intelligence

Suppose a company like Deloitte becomes dependent on AI for preparing reports that will ultimately influence government policies, which in turn affect the common person on the street. In that case, AI is not a helpful tool but a malaise. The situation at Deloitte had been so bad in the referred case that the company had to refund the Australian government! It must be noted that Deloitte is one of the Big Four!

Most companies are indeed providing numerous artificial intelligence tools to improve the productivity of the workers, and it is a good and wise decision. The use of AI is good towards this end. However, if, unfortunately, AI makes workers complacent, lazy and sometimes over-dependent on AI, then it is a very risky proposition. The problem is that AI uses the data that is available on the web, and consultancy is not about some kind of generalisation of task, but customised solutions. So what was done at Deloitte was not only completely unprofessional and unacceptable but also unethical.

Are Fees on H-1B Visas a Boon for India?

Sometimes, your biggest adversary (bane), who resorts to bullying, turns into your biggest friend (boon). The adversary in disguise who is out to help you achieve your goals.

The US has imposed a $100,000 annual fee for H-1B visas for foreign workers and a 3.5% tax on foreign remittances. This is a targeted decision. 71% of H-1B visas are held by Indian citizens, and a major portion of these visa holders send money back to India.

This decision by the US government will directly and adversely affect Indians aspiring to go to the US for a career. The brightest talents (students and professionals) have been migrating to the dreamland of the America to pursue their dreams which couldn’t find an ecosystem and environment in India. Not only this, but also the Indian government has been investing billions of dollars every year in these talents to educate and train them. This has resulted in increased costs for India. Apart from this, millions of dollars are flowing to the US for education in US universities and higher education opportunities.

GST 2.0 and the Indian Economy

GST 2.0 is a major revamp of India’s indirect taxation system with the aim of simplifying the GST regime, expanding the tax base, reducing the complexity of compliance, and stimulating consumption-driven economic growth. These reforms have largely rationalised GST slab rates by lowering the current four-tier structure (5%, 12%, 18%, and 28%) into a neater three-tier one: 5% for necessities, 18% for the general rate on most goods and services, and a new 40% slab on luxury and sin goods. This reform will be implemented from 22nd September 2025. It is expected to make the GST system more transparent, efficient and growth-oriented.

Simplification and Transparency

The proposed two-tier structure of 5% and 18% which covers most of the goods and services, while the 40% slab covers luxury and sin goods, is aimed to make the GST system simple for every stakeholder. Traders and businesses faced numerous challenges under the old regime due to overlapping and unclear rates, such as 12% versus 18% slabs or 18% versus 28%. The new regime looks simpler and neater with no confusion in compliance. It will bring down disputes, improving tax administration. It will bring down the compliance costs for businesses, particularly MSMEs.

Trump Unnecessarily Playing Victim Card

The US President Donald Trump is projecting the US as the greatest victim of India in trade in his social media post after the SCO summit 2025, which went well attended! He is trying to write a good script for a drama about his reckless foreign and trade policies gimmicks. However, the following are facts about the US trade with India and the rest of the world:

As far as the US trade deficits with its trading partners are concerned, there are some interesting and unusual facts.

US-India trade (exports and imports) was $212 billion in 2024, and a trade deficit of $41.5 billion. The US deficit with China is $270 billion, which is 128% of the total trade between the US and India. The US trade deficit with India is nearly one-fifth of the US trade deficit with China.

With the EU, this deficit is $161 billion, about four times that of the deficit with India. With other countries like Mexico, Vietnam, Taiwan, Japan, South Korea, Canada and Thailand, the US trade deficit is respectively $157 billion, $113.1 billion, $67.4 billion, $62.6 billion, $60.2 billion, 54.8 billion and $41.5 billion.

Trade Tensions, Tariffs, and the Future of Global Trade

“While world trade hit new peaks in 2024, uncertainty has increased as geo-economic tensions increase, supply chains are disrupted, and tariffs surge.” 

 

- UNCTAD, 2024

In 2025, the global trade environment is being defined by rising trade tensions and the return of tariffs as a leading economic policy weapon. As the world recovers from pandemic-related disruptions, nations are increasingly resorting to protectionism deploying national security, industrial sovereignty, and geo-economic strategy.

The New Wave of Tariffs

The governments have historically been using tariffs and non-tariff barriers as economic tools to protect their domestic industries from foreign competition or punish foreign countries. However, post-pandemic, there has been an increase in the tendency of some big economies to resort to tariffs. Global trade has been flourishing for a long time. More than sixty per cent of the global trade doesn’t attract any tariff, but the remaining trade is often subjected to very high trade tariffs and other non-tariff barriers. Agriculture, textile and dairy sectors are such areas where there are high trade barriers in the form of tariffs and non-tariff restrictions.

Impact of the US Tariff on India

India has become an important player in international trade since its integration with the global economy following liberalisation in the 1990s. According to World Bank data, India's trade-to-GDP ratio was 45% and its exports-to-GDP ratio was 21.2% in 2024. India mainly exports textiles, medicines and IT services while importing petroleum products and high-tech machinery. The USA has announced to impose 50% tariffs on Indian exports to the USA, which is a setback for the Indian economy.

Tariffs are in the alignment with mercantilist principles and aimed at protecting the domestic markets by matching the foreign trade barriers. However, according to the classical theory of trade (Ricardo), tariffs distort comparative advantage and increase consumers' costs, lowering welfare. So tariffs imposed by any country can, however, protect infant industries and balance out trade deficits. For India, an emerging economy with both mature and infant industries, the effectiveness of tariffs depends upon the extent, targeting, and tenure.

India's Protectionist Economy: A Shield in Need

Indian economy has traditionally been regarded as protectionist, with policies intended to shield local industry while exposing to healthy global competition. While some critics have argued that the approach suppresses growth and creativity, others argue that it is warranted because of the economic and social conditions in the country. The International Monetary Fund (IMF) projects India to grow at 6.4% in 2025, which clearly demonstrates the power and potential of India.

The protectionist policies have imposed a few non-tariff as well as tariff trade barriers, but not harmed the economy. Instead, India's growth story is one of incremental liberalization, with the government balancing to let in foreign investment while protecting national interest. The dairy sector is one such example, where India has not let itself be opened to foreign competition, lest it face the consequences on country-specific farmers and the rural economy.

The recent trade tensions with the United States have solidified India's protectionist stance. In the negotiations of the interim trade agreement, India did not acquiesce, rejecting proposals that accommodated American interests at the expense of Indian farmers and dairy farmers. The US had proposed allowing the entry of American dairy products, including non-vegetarian milk, which was seen as a threat to India's dairy industry. However, in the case of non-vegetarian milk, ethical considerations relating to religious sentiments is another important reason.

India Needs to be Tough with MNCs

When you are negotiating with a bully who is a narcissist, you need to confront wisely and skillfully; otherwise, the bully will keep creating ruckus for you. However, India has to tread very carefully as it has an opposition which is hell bent to down Narendra Modi at any cost. The Opposition wouldn't hesitate even if their actions would be damaging national interests because the same opposition has cheerleaders in the form of millions of supporters. However, India needs to be diplomatically strategic with multinational companies (MNCs) even if the opposition doesn't support this.

Microsoft has restricted Nayara. It cannot access its data. Whatever has happened in this case needs urgent attention from the government. India needs to take a tough stand against such MNCs which go against the interests of the Indian economy. The Nayara case is enough to show a tough face to Microsoft India. It must be made very clear to Microsoft India that it is registered in India and that it has to protect Indian interests first than to serve the American interests. The same message must be conveyed to other companies also.

Will India Use these Tariffs as an Opportunity?

Donald Trump has unilaterally imposed a tariff of 25% plus a penalty on Indian exports, citing its trade with Russia. While giving concessions to China, even though Chinese trade with Russia is far higher than that of India. Not only this, but the USA is also buying many critical items from Russia. In 2024, the US had a trade of $3.5 billion with Russia, and China's trade with Russia was about $240 billion in the same year. However, in the meantime, India and the USA are negotiating an interim trade deal, and this announcement has come amidst a series of negotiations!

The recent tariff imposition by Donald Trump on Indian exports seems like a strategic move rather than an abrupt decision. There are a few reasons which are forcing the USA to take such steps.:

Trump's Annoucements May be a Boon for India

Donald Trump has unilaterally imposed a tariff of 25% plus a penalty on India for trading with Russia and China despite the fact that the USA is also buying from Russia as well as China. However, India and the USA are negotiating an interim trade deal and this announcement has come amidst the series negotiations!

One may wonder what could be the possible reasons? Is it an abrupt announcement by Trump? Or a well thought strategy of the Trump Administration?

There are a few reasons which are forcing the USA to take such steps. First, India has taken a very tough stand on the issue of agriculture, dairy and some metals and is not ready to give any space to any country in these categories and the USA is desperately looking for new markets for its agriculture and dairy products. Second, the US realizes very well that the innings of the US as the most powerful economy in the world is going to be over soon in a decade and the export business of dollars wouldn’t continue unchallenged for long. Not only BRICS but many other countries are also looking for alternatives to the US dollar.

The Rise and Fall of the Bretton Woods System

Both the World Wars proved to be very beneficial for the United States and particularly, the Second World War. In the First World War, the US made huge fortunes through loans and arms sales to Allied Nations. It amassed huge reserve of gold and resulting in the USA becoming a creditor nation. The Second World War transformed the USA into a superpower of the world, which was later challenged by the Union of Soviet Socialist Republics (USSR or today's Russia). The WWII boosted the US industries at a time when the whole Europe and Japan was devastated. By 1945, the US held 70% of world gold reserve. The Bretton Woods System put the foundation of an economic and financial architecture in the world, which transformed the USA into a formidable economic force which none could ignore and the US currency, US dollar (USD) global reserve currency.

विकास बढ़ा रुतबा चढ़ा

भारतीय अर्थव्यवस्था जापान को पीछे छोड़ते हुआ दुनिया की चौथी सबसे बड़ी अर्थव्यवस्था बन गई है। अंतरराष्ट्रीय मुद्रा कोष (आईएमएफ) की रिपोर्ट के अनुसार, भारत की जीडीपी ने 4.187 खरब डॉलर है। इस आर्थिक विकास ने भारत को वैश्विक स्तर पर सबसे तेजी से बढ़ने वाली प्रमुख अर्थव्यवस्थाओं में से एक बना दिया है। इस विकास यात्रा में विभिन्न वैश्विक चुनौतियों के दौरान भारतीय अर्थव्यवस्था ने लचीलापन और अनुकूलनशीलता प्रदर्शित की है, जिसमें कोविड-19 महामारी, आपूर्ति शृंखला व्यवधान और भू-राजनीतिक तनाव भी शामिल हैं।

आर्थिक विकास में कृषि व विनिर्माण जैसे पारंपरिक क्षेत्रों के अलावा सेवा और प्रौद्योगिकी क्षेत्र की महत्वपूर्ण भूमिका रही है। ये क्षेत्र न केवल अर्थव्यवस्था को संरचनात्मक विविधता प्रदान करते हैं, बल्कि विकास के वाहक और जोखिम शमन तंत्र प्रदान करने के साथ-साथ भारत को दुनिया का उत्पादन केंद्र बनने के इसके सपने को आधार भी प्रदान करते हैं।

Who is Terrorist?: Entrepreneurs or Terrorists

India dreams of becoming a developed country by 2047. It is not impossible to achieve this big and ambitious dream but it is definitely very difficult; almost near impossible if all the players don’t do their parts properly. The biggest difficulty in this is the mind-set of Indian citizens and that situation is very peculiar.

A strange belief has developed in the Indian psyche, which considers traders and big businessmen as criminals and capital as wrong and sometimes sinful. Poverty has been glorified in Indian texts (however, poverty was glorified for the Brahmans, the knowledge preachers and the teaching community). Not only this, the Indian media as well as the society have developed a tendency to give a clean chit to criminals based on caste and region. Corruption has become such a dignified act that it is now the new normal to come out of the vicious circle of poverty. Not only this, even in terrorists, the family background of terrorists and who is a teacher's son often becomes a topic of national discussion!

India's GDP may become 50 trillion dollars, and per capita income may even exceed that of America, but as long as India keeps looking for criminals among traders and big businessmen and a teacher's son among terrorists, it is impossible for India to become a truly developed country.

Why None Supported India during Operation Sindoor?

For those questioning India's foreign policy, they need to read the following piece of information (news clipping).

'India aims to sell defence equipment worth Rs 50,000 crore to the world by 2029.'

The size of the world defence market is more than $600 billion, and by 2029, the market is expected to grow to the size of around $900 billion. Rs 50,000 crore is less than $4 billion, which is about just 2% of the total global market! So this piece of information may look very ordinary. But the fact is that it is not. It is a matter of concern for every country; those which export defence equipment to other countries of the world and those which import defence equipment from other countries.

India has traditionally been an importer and a net buyer of defence equipment. But India aspires to become an exporter of defence equipment, and that too in some key areas, which are dominated by developed countries and China only. Not only this, but India seems to be very aggressive about it. That means there is another serious player on the block, which is expected to become the third-largest economy in the world in just a few years and has a very young population that wouldn’t only drive demand and growth in the economy but would also engage in research and development!

History of the US Dollar as the Reserve Currency of the World

There was a streak of events in history that made the economy of the US strong enough following the British economy that its currency, the US dollar, is now the world's reserve currency.

It all began in the late Eighteenth century when the USA emerged to be one of the most significant economies for numerous economies of the Western world, especially Latin America.

Early Beginnings

• 1785: The United States formally designated the dollar as its currency following the Continental Congress' declaration.
• 1792: The Coinage Act founded the U.S. Mint and implemented a fixed-basis bimetallic standard using gold and silver.
• 1800s: As the British pound sterling, the world's largest Empire's currency, dominated world trade, the U.S. dollar slowly increased in stature as the economic power of America developed.

The 19th century witnessed the United States evolving from a fledgling power to a powerhouse of economics. As the industrial strength of America grew, so did the global presence of its currency, the US dollar. Nevertheless, throughout the 19th century, sterling was still the world's most prevalent reserve currency, leaving very little room for any other currency. But the US dollar continued to grow its footprint and became indispensable to most countries in bilateral exchanges with the US as the US reconfigured its industrial capacity. The British Sterling was still the most powerful currency in the world during the 19th century.

Changing US Trade Policy and World Economy

The trade policy of America has evolved over one century post the First World War. As soon as the Second World War started, the USA saw an opportunity in that war that was going on in Europe and elsewhere in the world. The US was convinced that Europe would undergo the hammer of the war, and post-war, a lot of reconstruction and other business opportunities were openly available. The fall of Japan in the war made the USA the only big economy in the world to take care of the needs of Europe and the rest of the world!

The US invested in capacity building across all the sectors, which eventually helped to earn huge money during wartime. Because of the wartime crisis, the US accepted gold for transactions, which led to a huge accumulation of gold in the US. Following World War II, the United States provided the Marshall Plan (European Recovery Plan) to Western Europe to rebuild Europe, championing free trade by reducing interstate trade barriers and globalisation, helping establish the General Agreement on Tariffs and Trade (GATT) and later the World Trade Organisation (WTO). This system aimed to gradually reduce global trade barriers.

Is Golbalization Going Dead?

The US President Trump has announced reciprocal tariffs. However, it is available with a rider of a 90-day pause for most of the economies except China and a few other retaliatory economies. This has created chaos in the whole world in general and the security markets in particular. Now, the US has the highest average import tariffs since 1938, when its tariffs peaked at 15.5%, which started falling once the Second World War started in 1939. Post implementation of reciprocal tariffs, the average import tariff rate would be 14.5% in comparison to 2.4% in 2024.

It should be noted that globalisation and free trade were the brainchildren of the USA, which were implemented across the globe through the UNO, IMF, World Bank, WTO (erstwhile GATT) and other multilateral agencies and negotiations to achieve the economic goals of the developed economies in general and the USA in particular. The US used these two concepts and these agencies to turn the US dollar into the reserve currency of the world, eventually replacing gold.

Should India Respond to the Unilateral Reciprocal Tariffs?

India has become an important player in international trade post its integration with the global economy after liberalisation in the 1990s. At present, India has a trade-to-GDP ratio of about 40%. India mainly exports textiles, medicines and IT services while importing petroleum products and high-tech machinery. Reciprocal tariffs are used as tools either to retaliate or challenge the trade balance. The USA has announced it to impose 26% tariffs on Indian exports to the USA. Though the USA has pushed a 90-day pause button for most countries, barring China and a few countries which have responded to the 2nd April annulments of the US President.

Reciprocal tariffs are in alignment with mercantilist principles and aimed at protecting the domestic markets by matching the foreign trade barriers. According to the classical theory of trade (Ricardo), tariffs distort comparative advantage and increase consumers' costs lowering welfare. Reciprocal tariffs can, however, protect infant industries and balance out trade deficits. For India, an emerging economy with both mature and infant industries, the effectiveness of reciprocal tariffs would depend upon the extent, targeting, and tenure.