"Since India relies far less on exports as a share of its GDP [Gross Domestic Product] compared to some other Southeast Asian countries, the impact of US tariffs won't be that big on India," says Dr Srividya Jandhyala, an Associate Professor of geopolitics and business strategy at Singapore's ESSEC Business School.
Jandhyala's first book, The Great Disruption, which was published in June this year, unpacks how geopolitical shifts impact global businesses and markets.
In an exclusive interaction with The Quint, she speaks about India's recent pivot towards China, why Beijing was spared additional US tariffs despite being the largest importer of Russian oil while India was not, and much more.
Excerpts from the interview:
The publication of your book comes at a pertinent time as we are currently seeing a pivot taking place in India following the imposition of 50 percent tariffs by the US. India has made efforts to re-engage with China, for instance. How would you view this pivot, and what do you think are going to be its implications, say, in the short to medium term?
There is a a realignment going on in terms of who is seen as an ally, who is seen as a potential partner for India to work with, and how to reorient some of the challenges that may be occurring in working with specific partners. This a system in flux, and this is an area that warrants a lot of interest. Everybody's watching to see what this means for the business community, what this means for economic relationships, and how national security interests are influencing the business orientation and the economic impact of these things.
Some say that India's pivot away from the US is necessary only till such time that President Trump is in power, so another three-and-a-half years, roughly. At the end of his term, a new president will be sworn in who might view the India-US relationship through a more friendly lens. During this time, if India and China continue to cooperate economically, the Indian and Chinese markets are bound to get more closely integrated. When President Trump demits office, how easy or difficult will it be for India to shift focus away from China and back towards the US?
I think, fundamentally, the challenge that companies are facing has to do with the question about the long-term impacts of dealing with today's changes. Ultimately, this is a question about market access in terms of, can Indian exporters continue to be competitive in the US? And if they're not, where are they going to diversify, where are they going to go? Who are the alternate players, and which are the alternate markets that they're going to engage with?
If companies choose to build ties with other partners, or if companies choose to pause or cancel contracts with existing clients, then it makes it that much harder to re-engage, even if the tariffs were to go away in the future.
Let's take a simple analogy. We all have our own habits, we all have our own preferred model or brand of everything that we choose in our lives. And it takes a lot to change that. It takes a lot for us to think about, oh, should I re-evaluate my decision about which brand of milk I buy? And usually we don't. We only do that when there is some reason. Maybe the brand that you want is not available anymore, or maybe you had some health issue and you were advised to change it. So only big events force us to make these kinds of changes. I think that that analogy applies here as well. So, once companies end up investing in relationships with partners, suppliers, and clients, why would they change that? Unless there is some big reason to change that, right?
So if Indian companies and exporters are no longer exposed to the US market, but instead end up forming developing partnerships and ties with those in other countries in other markets, those will sustain... they will tend to last, even if the tariffs were to go away.
A lot has been said about what the impact of the US' 50 percent tariffs is going to be. Optimists say that it's hardly going to make any difference, while others view it more pessimistically, saying that Indian industries like textiles and pharmaceuticals, which are in great demand in the US, are going to face a massive setback. Where do you stand in this debate?
India relies much less on exports as a share of its GDP compared to some other countries. So India has a relatively low share of exports relative to GDP. Whereas in some other Southeast Asian countries, it can be as high as 80 percent. So, I think there is some reason to believe that the impact on India may not be as big as it might have been in other countries.
But at the same time, I think there is going to be some consequences in terms of whether companies can have access to specific markets. And if those ties are going to be sticky, then even if the tariffs go away, are you still going to have access to the market? Are you still going to be able to compete in that market? Even in the future if tariffs go away or if it ends up being a more interesting or more welcoming environment, it becomes much harder to compete.
In your book you speak extensively about US-China competition, and how it is rewriting the rules of global commerce. But we recently saw a situation whereby while India was charged an additional tariff rate of 25 percent because of its continuing purchase of Russian oil, China, which is the largest importer of Russian oil, has been spared the additional tariffs. So my question is two-part: What explains this move by the US? And secondly, how exactly is the US-China competition and cooperation, the balance between the two, shaping the global order?
When it comes to the relationship between the US and China, these are the largest economies in the world. What we are seeing is that geopolitics is also about economics; geopolitical goals, in part, are also dependent on economic interests and specifically what roles companies play in this relationship. So when it comes to the tariffs that India faces versus those that China faces, this is a classic example of this interconnectedness, or this interlinking of political and economic interests as well as political and economic tools as leverage.
What we also see is that the major feature that defines whether companies are facing an advantage or a disadvantage is really about where they're from. Till a few months ago, Indian companies were at a relative advantage compared to Chinese companies. Why? Because they were Indian companies. While some of it had to do with their technology and their products and the capabilities that they had, a lot of it had to do with the fact that they were Indian companies relative to Chinese companies.
Now, the same advantage has been flipped. What used to be an advantage has now become a relative disadvantage. So corporate nationality matters. And that is, in some sense, the defining feature of the geopolitical risks that companies are facing.
Over the last few years, there have been several events which have caused disruptions in the world order. It started with the Russia-Ukraine war in February 2022, which is continuing, and now we have Israel's war in Gaza. Now because of this, there have been several supply chain disruptions, for example in the case of oil and a myriad of other products. Do you think the relationship between geopolitical changes taking place currently and businesses is more crucial than ever, and how are companies impacted by these massive changes?
Some studies suggest that the stock market actually reacts pretty quickly; and in some instances, the reaction is not very big. So, we might be tempted to believe that these types of geopolitical events don't have such a big impact on what companies are doing. I would say that's probably only one level of thinking, and there is a deeper level that we need to look at. The deeper level is really the building blocks. What is holding up the ability of companies to operate across borders? What is making it possible for a company from one country to go and invest in a faraway location where they can be sure that they're going to be paid, that their assets are going to be safe, that they can even sell their products and services in that market?
And with the type of geopolitical changes that we are seeing, whether this is about security interests or tariffs or export controls, all of these are various tools which are fundamentally reshaping the building blocks that go to support companies for an expansion. So, this is shown in whether you can access another market or not. So, tariffs, for example, will restrict your ability to compete in another market.
These types of changes are impacting whether companies are going to compete on a level-playing field.
For more, watch the full interview.