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Union Trade and Industry Minister Piyush Goyal last month reaffirmed that India’s exports are on track to meet the ambitious target of $ 400 billion set for 2021-2022, which is growth by 37% compared to last year.
This remarkable surge, compared to subdued domestic sentiment and equally sluggish demand, is why most Indian businesses are eagerly awaiting the new foreign trade policy, which is now expected to be announced in April next year.
In a broader perspective, the development of this new policy offers us the opportunity to take full advantage of the global disruptions induced by the pandemic on the one hand, and the persistent geopolitical tensions against China from the Western world on the other hand. . In our opinion, India must formulate its new policy with a view to firmly claiming a pole position in world trade, in the general context of the pandemic and anti-Chinese sentiment.
However, the formulation of an effective and successful CTF for the next five years requires above all a calm analysis of current and historical policies, because we need to know what has worked so far and, more importantly, what has not. has not and can be changed or improved.
There are many elements of FTP that deserve critical appraisal. For example, we must both establish responsibility for the failure to implement duty drawbacks, and also map out a course correction plan for the future.
We need to review our free trade agreements (FTAs) with countries and regions like South Korea, Japan and ASEAN, and analyze why India has not benefited from them. In our view, one of the main reasons FTAs ​​have not produced the desired results is that immigration policies have not improved in line with trade results.
The poor performance of India’s manufacturing sector is another reason our FTAs ​​have fallen short of expectations. We find it worrying that after decades of export promotion India is still constrained by a highly polarized manufacturing sector with a handful of large-scale units on one side and several thousand to thousands of micro or small units on one side. ‘other.
The almost complete absence of mid-sized units with annual revenues of $ 10-100 million is particularly glaring, once you consider that countries like China, Japan, Korea and Germany have built their global exports on the backs of these midsize manufacturing units.
The only conclusion we can draw is that India’s manufacturing sector urgently needs new policies that can fuel the growth of a new league of midsize units. Perhaps the government could consider an extension of the manufacturing policy in India with direct benefits for the units, especially in some key industries such as textiles and clothing, pharmaceuticals and automotive components. In addition, India has the opportunity to participate in several plurilateral WTO negotiations on services, environmental products and government procurement projects.
Our country has also squandered precious resources over the years on several corrupt export promotion organizations with little result in terms of results. The new FTP should take due account of these conditions. An important consideration here is redesigning the MDA and MDMA grant programs to genuinely support exporting companies that deserve this support, while ensuring that the benefits are not used more than three times in their lifetime. In my opinion, India’s export advice would do well to follow the rules of China and the United States. In addition, they should be led by IFS or IAS executives with their KPIs linked to the union budget.
We also need to review the incentives we provide for foreign companies to get into manufacturing in India. For example, can India offer intellectual property protection to foreign manufacturers, which remains a painful missing point in China and most of the SEA countries at present. In fact, today we have a rare opportunity for India to take advantage of the anti-Chinese sentiments prevailing in the world and actively seek out medium to large sized organizations to move their manufacturing to India. Prime Minister Modi did something similar before when he was Chief Minister of Gujarat. One example is the passage of Tata Motors from West Bengal to Gujarat at night.
As for the global macro environment, the new CTF is expected to place special emphasis on improving trading conditions with a handful of influential countries: including the US, UK, Canada, Germany, France and Israel to the west; and South Korea, Taiwan, Japan and Australia to the east.
As stated above, India must clearly assume the leadership role in global trade agreements and conclude agreements with clearly defined gains for both parties. This adjustment in our approach to trade agreements will clearly differentiate India from China. Our overriding goal must be to present India as a more attractive destination than anywhere else in today’s environment.
We also need strong international agreements to bring production with technology to India. Finally, India must also consider healthy competition with other Asian countries, including Bangladesh, Sri Lanka, Thailand, Malaysia and Vietnam, and find common ground to create a beneficial and bilateral business environment. with each of these countries that are a real victory. win-win situation.
There are a handful of other imperatives for India to emerge as a world leader in foreign trade. We need to revitalize our export subsidy programs and also announce new incentives for FDI participation in manufacturing. Creating high-quality infrastructure must be a high priority and here an objective measure would be to improve India’s ranking on the Global Logistics Performance Index – which according to the last report was in 44th place. place in 160 countries.
In conclusion, the above observations and recommendations aim to provide a high-level framework for assessing both the critical gaps in our foreign trade policy as well as the opportunities that are opening up for India in a post-pandemic world. rapidly changing. Sustained and strong export growth is likely to become a crucial determinant of India’s economic recovery from the pandemic. Considering this point of view, it is obvious that it is essential to put in place India’s new foreign trade policy.
The author is CEO of BuyHive, a global B2B sourcing platform.
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