India and global trade policy changes


By Dr. Badri Narayanan Gopalakrishnan and Devashish Mehta


India’s new Foreign Trade Policy (FTP), which was originally expected on April 1, 2020, has been delayed due to unprecedented weather. It was first postponed for one year (April 2020 to March 2021) on March 31, 2020, then in 2021 for one more year due to the turbulent situation caused by the COVID-19 pandemic. Thereafter, the old policy was extended every six months due to the fluid global situation. The FTP establishes procedures, policies and programs to boost India’s exports, reduce its dependence on imports and create jobs. The last two years have been extremely difficult for the world, especially for India. Looming fears of a recession in 2023 make the picture even bleaker. These disruptions are radically transforming global supply chains, which have been disrupted due to the COVID-19 pandemic and the Russian-Ukrainian conflict which has also driven up inflation around the world in a difficult year for the world. World trade. India needs a strong FTP to improve its trade, fight disruptors and leverage trade that is being taken away from China.

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Highlights of India’s Trade Policy 2015-2020

The main objective of India’s Foreign Trade Policy 2015-2020 was to make India a significant player in global trade by promoting exports through initiatives such as “Make in India”, “Digital India” and “Skills India” to create an export promotion mission. . While focusing on increasing exports, the central government wanted to make imports more targeted and rational. It introduced two new export incentive schemes: Export of Goods Scheme of India (MEIS) and Export of Services Scheme of India (SEIS). Efforts have been made to sign several Free Trade Agreements (FTAs). Exports of defense and high-tech articles have also been encouraged by measures such as changes in FDI policy; greater clarity on industrial licenses for this sector; rapid processing of applications; ammunition list; creation of HS codes for articles in this sector; and the creation of promotional institutions. Interest subsidy programs and other trade support mechanisms in the credit, banking and insurance sectors have been launched to help micro, small and medium-sized enterprises (MSMEs) and exports. 108 clusters of MSMEs have also been identified for targeted interventions to boost exports.

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Expectations of the new foreign trade policy 2022-2027:

The District Export Centers initiative is expected to be an important component of the new FTP. The objective is to increase the potential of each district in the country to realize its potential as an export hub by targeting job creation, export promotion and manufacturing. The FTP should also focus on correcting trade imbalances and reducing the fiscal deficit by increasing exports through improving the operations of the domestic manufacturing and service sectors, in combination with the development of logistics infrastructure and efficient, cost-effective and adequate public services. . The goal of doubling exports by 2025 should also remain a focus. The new FTP is also expected on digitization and e-commerce.

How has 2022 been an important year for India’s foreign trade policy?

The current government has placed a lot of emphasis on FTAs, as they serve not only as the basis for a deeper geopolitical relationship, but also as a trade partnership. As of April 2022, India had signed 13 Free Trade Agreements (FTAs) with its trading partners, including key trade agreements like the India-UAE Comprehensive Partnership Agreement (CEPA) and the Economic and Cooperation Agreement. India-Australia Trade (IndAus ECTA).

In April this year, India and the EU agreed to launch the EU-India Trade and Technology Council. India and the EU plan to sign the FTA by next year. The two sides can cooperate closely on issues concerning trade, climate, clean energy, digital technology, green hydrogen and people-to-people relations. The EU had demanded that India lower its tariffs on automobiles, wines and spirits, while India also demanded the lowering of tariff barriers. Fear of an influx of European imports into India has made India anxious. India has also asked to be recognized as a data safe country. These are a few points of contention between the two. An FTA will support EU businesses while helping India develop its industrial capacity and ensuring its greater participation in global supply chains. The FTA with the EU is crucial as it would help India in its plan to develop 100 smart cities in the future.

The India-UK FTA has been in talks for some time now, with negotiations progressing well for a year or more. The unstable political situation in the UK played a role in delaying the FTA. Prime Minister Rishi Sunak has expressed his commitment to an FTA. Significant contentious issues include immigration, mobility of professionals in the UK and strict rules on the origin of alcoholic beverages in India. The “All Party India (Trade and Investment) Parliamentary Group (APPG)” was established by the UK Parliament to promote trade and investment between India and the UK. Completing the trade pact could boost trade by £28billion by 2035 and nationwide wage growth by up to £3billion. The agreement would give a significant boost to bilateral trade.

FTA talks between India and the United States have seen little progress over the past few years. Indian Commerce Department officials said Washington’s failure to prioritize the issue caused the talks to be delayed. However, the talks are expected to progress quickly in 2023. US demands, such as buying US dairy and a more liberal data privacy policy, have prolonged the process. A series of punitive trade actions by the United States derailed the FTA negotiations. Changes to US priorities this year have also led to insignificant results. In January 2022, in an announcement, India agreed to import cherries, alfalfa hay, and pork and pork products from the United States. Similarly, the United States announced that it had approved the import of mangoes and pomegranates from India. This was an important development in trade relations.

Global supply chains, non-tariff measures (NTMs) and foreign direct investment (FDI) should be kept in mind when developing FTAs ​​and our new FTP. Data on the use of FTAs ​​should also be carefully studied to understand the role of FTAs ​​in promoting trade. The increase in global protectionism has significantly affected the global economy. The use of global practices such as benchmarking will also play an important role in improving our FTP. The UK, US and EU have emphasized labor rights, environmental aspects, gender and equity in their trade agreements as well as their trade policy positions. While this is a positive step to promote sustainable development, India’s trade policy must address these aspects, while considering that meeting these standards may erode our trade competitiveness in the future.

The author is the former head of trade and commerce at NITI Aayog. Devashish Mehta is an intern at Infinite Sum Modelling.


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