India’s Leaders Must Decide Between Growth and Protectionism

After negotiating a trade pact with Mexico and Canada, President Donald Trump has turned his attention toward trade policy with India. In characteristic Trump fashion, he mixed insults, praise and bravado in his opening salvo.

“India, which is the tariff king—they called us, and they say, ‘We want to start negotiations immediately.’ … They said, ‘No, we want to keep your President happy.’ Isn’t that nice? Isn’t that nice? It’s true. They have to keep us happy because they understand that we’re wise to what’s been happening,” Trump said.

Larry Kudlow, Trump’s top economic advisor, confirmed with reporters Thursday at the White House that trade discussions have started with India, a “very valuable ally.” Lower-level U.S. officials and India’s trade ministry  have been haggling for weeks over tariffs on a range of products. India, which did not receive a waiver from Trump’s steel and aluminium tariffs, has deferred retaliatory tariffs until Nov. 2.

Amid that backdrop, India’s prime minister Narendra Modi faces a critical test Monday, when the Reserve Bank of India plans to begin enforcing a data localization mandate. The regulation scheme, strongly opposed by many global financial institutions as a non-tariff barrier to trade, will require financial firms providing services in India to house their data within the country’s borders.

Ultimately, Indian leaders must decide if they want to promote open trade and economic growth or pursue this protectionist path. Global payment firms such as MasterCard, Visa and PayPal have urged the RBI to delay the diktat to allow more time to comply, but recent news reports indicate Modi’s government remains steadfast. Many U.S.-based firms such as Google and Amazon have signaled they will comply with the regulation, loathe to lose market share in a country of 1.3 billion people—78 percent of adults have a bank account, which covers 99 percent of households.

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