Opinion: What India should do as it faces the Trump tsunami

Global economic crises have a way of imparting useful lessons.

When the Covid-19 pandemic hit the world, the fiscal stimulus strategy of Franklin Roosevelt to resuscitate the US economy from the quagmire of depression in the 1930s was replicated by almost every country.

The East Asian crisis of 1997 due to the unregulated flow of capital has made many developing economies like India wary of embracing full convertibility of their currencies.

The US subprime crisis of 2007-’08, which busted the myth that Big Banks Do Not Fail, has made countries more cognisant of the importance of regulating banks effectively.

But how does one deal with the tariff tantrums of US President Donald Trump? Retaliate against the US with high tariffs like China, or demurely wait and watch like India? This man-made crisis seems to have befuddled the best of analysts.

It brings to mind the “beggar thy neighbours policy” adopted by many countries during World War II, when the fixed exchange system under the gold standard crumbled. Countries started imposing import tariffs, introduced import quotas and resorted to competitive currency devaluation to boost their domestic economies, regardless of their impact on trading partners.

As the war was ending, the establishment of the International Monetary Fund in 1944 resuscitated the gold standard, reinforced...

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