India’s economic landscape is evolving rapidly, and with shifting global trade dynamics, renowned banker Uday Kotak has emphasised the need for India to focus on competitiveness rather than resorting to protectionist measures.Speaking on the economic challenges in the Trump era, Uday Kotak, Founder & Director at Kotak Mahindra Bank, outlined key concerns surrounding trade policies, capital flows on the sidelines of the 3-day Kotak Institutional Equities' Investment Conference. He also highlighted the need for structural reforms to enhance India’s global standing. The Risks of ProtectionismKotak cautioned against excessive protectionism, arguing that India must embrace competition rather than shelter domestic industries behind high tariffs.While some degree of protection is necessary for emerging industries, excessive barriers could stifle innovation, reduce productivity, and limit India’s ability to integrate into global supply chains.He highlighted that India currently imposes around 10% tariffs on American goods, whereas the US levies only 3% on Indian products.With global trade policies shifting, India must carefully navigate its trade strategy to avoid potential setbacks, particularly if other countries flood the market with cheaper goods due to their surplus capacities.Instead of relying on protective barriers, Kotak believes the focus should be on making Indian industries more competitive through productivity enhancements, skill development, and better infrastructure.Strengthening India’s Trade and Capital FlowsDiscussing India’s trade dynamics, Kotak pointed out that while India’s current account deficit remains under control at 1.2-1.3% of GDP, potential disruptions in global trade could pose challenges. The US dollar’s strength has led to increasing investor preference for dollar-based assets, impacting capital flows into emerging markets, including India.Since the liberalization of foreign equity portfolio investments in 1995, India has attracted nearly $800 billion through FPIs, $900 billion-$1 trillion in FDI, and $500-$600 billion in foreign commercial borrowings.With foreign exchange reserves of $560 billion, Kotak believes India is well-positioned to withstand external shocks. However, he warned that shifting US policies could impact India’s trade structure, necessitating strategic realignment.The Need for Structural ReformsFor India to remain competitive on the global stage, Kotak emphasized the importance of three key factors:He emphasized the need for India to (1) improve productivity, (2) avoid excessive protectionism and (3) increase manufacturing as a percentage of GDP. He also highlighted the importance of execution in both macro- and microeconomic policies.The Future: AI, Global Brands, and Economic ResilienceLooking ahead, Kotak discussed how artificial intelligence (AI) will reshape industries, including financial services and education. India must proactively adapt to a post-AI world by fostering innovation and ensuring job creation in evolving industries.He also emphasized the potential for Indian companies to build global consumer brands, citing the success of Titan and India’s quick-service restaurant (QSR) industry as examples. Rather than relying solely on domestic consumption, Indian businesses should scale their operations internationally.(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)