Editorials/Opinions Analysis For UPSC 05 September 2025

Content:

1. Trump’s tariff war as opportunity for the Global South
2. GST 2.0 is a landmark in India’s tax journey

Trump’s tariff war as opportunity for the Global South

Basics

• Global Context:
  • Rising economic nationalism and protectionism led by the U.S. under Trump.
  • Challenges to liberal international order: free trade, multilateralism, global institutions.
  • U.S. tariffs and sanctions reshaping global trade dynamics.
  • India caught in cross-currents: balancing ties with the U.S., China, Russia, and Global South.
• Key Issue:
  • U.S. tariffs, sanctions, and unilateralism disrupt India’s economy (textiles, gems, metals, auto parts).
  • Erosion of 25 years of India-U.S. strategic convergence.
  • Need for India to recalibrate strategy amid polycrisis (economic, geopolitical, technological).

Relevance :

• GS II (IR, Governance) – India–US relations, impact of protectionism on multilateralism, strategic autonomy, Global South leadership.
• GS III (Economy, Trade) – Effects of tariffs on exports, FDI flows, supply chains, energy security.
• GS I (Society & Diaspora) – Indian diaspora in U.S. facing racism and visa uncertainties.

Practice Question :  How can India leverage the ongoing global protectionist wave to strengthen its leadership role in the Global South? (250 Words)

Trump’s Motivations

1. Domestic Politics
   1. Pandering to “silent majority” resentful of globalisation’s inequities.
   1. Instead of structural reforms, resort to xenophobia, racism, and economic populism.
   1. Sanctions (30+ nations), tariffs (70+), attacks on immigration, trade blocs reshaped.
2. Economic Strategy
   1. Tariffs = disguised tax on American consumers (70% burden).
   1. Goal: maintain U.S. economic dominance, curb China’s rise (26% vs 17% of global GDP).
   1. Protectionism, subsidies, and coercive trade tactics with hypocrisy (criticises India’s farm protections while imposing huge tariffs on tobacco, dairy, fruits).
3. Geopolitics & Security
   1. Bipartisan consensus in U.S. on reversing deindustrialisation and checking China.
   1. Tariffs weaponised for leverage on Russia–Ukraine war.
   1. China seen as ultimate challenge → tariffs aligned with U.S. security and strategic interests.

Impacts on India

• Economic Impact
  • Tariffs hurt textiles, jewellery, auto parts, metals.
  • Farmers face pressure as U.S. demands India cut protections while it maintains high tariffs.
  • India conceded on oil imports from Iran/Venezuela and cotton duties, weakening bargaining power.
• Geopolitical Impact
  • U.S. re-hyphenating India–Pakistan; renewing ties with Islamabad.
  • Quad commitments uncertain; U.S. firms hesitant in India.
  • India–China tensions exploited; two-front security problem intensifies.
• Societal Impact
  • Indian diaspora facing racism amid U.S. political climate.

What New Delhi Must Do

1. Re-examine Assumptions
   1. Don’t overestimate “democratic counterweight to China” narrative.
   1. Recognise limits of U.S. convergence; protect national interests.
2. Adopt Firm Negotiating Posture
   1. U.S. respects strength, not compliance.
   1. Avoid unnecessary concessions (Iran oil, cotton duties).
   1. Balance ties with multiple powers (multi-alignment > symbolic alliances).
3. Correct Foreign Policy Adventurism
   1. Limit over-personalised diplomacy, diaspora theatrics.
   1. Prioritise strategic interests over symbolic gestures.
4. Leverage Polycrisis
   1. Champion multipolarity as an alternative to U.S. unipolarity or China–U.S. bipolarity.
   1. Push for a New Economic Deal – fairer rules for Global South, reform of multilateral institutions.
5. Address Domestic Structural Weaknesses
   1. Revive manufacturing (lowest in 40 years).
   1. Tackle unemployment, private investment stagnation, poor R&D.
   1. Use PSUs strategically like China’s SOEs.
   1. Build bipartisan consensus at home, coordinate with Global South abroad.

Larger Significance for India

• Short-Term: Protect economy from tariffs, secure energy supplies, manage U.S. unpredictability.
• Medium-Term: Avoid two-front security trap; balance U.S. and China ties.
• Long-Term: Lead Global South by advocating equitable globalisation, inclusive multilateralism, and multipolar world order.

GST 2.0 is a landmark in India’s tax journey

Basics

• GST (Goods and Services Tax): A destination-based indirect tax introduced in 2017, subsuming multiple central & state taxes (excise, VAT, service tax).
• GST Council (Art. 279A): Apex decision-making body chaired by Union Finance Minister with state FMs as members.
• Earlier Structure: Multiple slabs (0%, 5%, 12%, 18%, 28%), causing complexity, inverted duty structures, and compliance burden.

Relevance :

• GS III (Economy) – Tax simplification, inverted duty correction, MSME relief, green growth incentives.
• GS II (Governance & Federalism) – GST Council (Art. 279A), cooperative federalism, dispute resolution via GSTAT.
• GS I (Society) – Relief on essentials, healthcare, insurance, rural/agri impact, job creation in labour-intensive sectors.

Practice Question : Critically analyse the role of GST reforms in advancing the vision of Viksit Bharat 2047. (250 Words)

Structural Simplification

• Shift from 4 major slabs → 2 slabs:
  • 18% Standard Rate
  • 5% Merit Rate
  • 40% De-merit Rate for luxury/sin goods (e.g., tobacco, high-end SUVs).
• Impact: Reduces complexity, boosts predictability, and aligns with global “simple tax” practices.

Relief for Households & Consumers

• Exempted: UHT milk, paneer, chapati, paratha (essentials).
• 5% bracket: Soap, shampoo, toothpaste, bicycles, kitchenware.
• Reduced: Packaged foods, noodles, chocolates, beverages.
• Outcome: More disposable income, higher consumption, improved equity.

Health & Insurance Boost

• Zero GST on life and health insurance – improves penetration, supports senior citizens and low-income families.
• Exemptions/reductions on drugs & devices for cancer, rare diseases, chronic conditions → affordable healthcare, lower out-of-pocket expenditure.

Agriculture & Farmers

• Tractors, farm machinery @ 5%.
• Fertilizers & key inputs (sulphuric acid, ammonia) @ 5% (down from 18%).
• Outcome: Lower cultivation costs, higher productivity, better farm incomes.

Labour-Intensive & Traditional Sectors

• Rate cuts for handicrafts, marble, granite, leather goods.
• Impact: Demand revival, job protection, export competitiveness, preservation of traditional industries.

Key Sectoral Corrections

• Textiles: MMF & yarn @ 5% → removes inverted duty anomaly, boosts exports & jobs.
• Cement: From 28% → 18% → reduces construction cost, boosts housing & infra growth.
• Renewables & auto parts: Lower rates → accelerates green growth & EV ecosystem.
• Hospitality & wellness: Rationalized → tourism revival & service sector growth.

Institutional & Process Reforms

• GST Appellate Tribunal (GSTAT): Operational by end-2025 → faster dispute resolution, legal consistency.
• Provisional refunds for inverted duty cases → liquidity support to businesses.
• Risk-based compliance checks & harmonized valuation rules → lower compliance burden, less litigation.

Fiscal & Economic Balance

• Phased implementation from Sept 22, 2025 → protects revenue while ensuring immediate consumer benefits.
• Demand push + investment revival → short-term growth stimulus, long-term revenue buoyancy.

Stakeholder Alignment

• Many CII recommendations accepted → simplification, healthcare relief, farm support, textile competitiveness.
• Reflects consultative federalism & partnership with industry.

Big Picture – GST 2.0

• A citizen-centric reform rather than just a technical tax change.
• Promotes inclusive growth: benefits households, farmers, workers, MSMEs, and traditional industries.
• Aligns with Viksit Bharat 2047 by simplifying taxation, boosting competitiveness, and strengthening institutions.