July 20, 2024

Lukmaan IAS

A Blog for IAS Examination

WHY INDIA NEEDS TO RESET ITS TRADE POLICY

THE CONTEXT: India’s resistance to expanding the World Trade Organisation’s negotiation agenda, particularly in areas like e-commerce, trade, climate change, and investment facilitation, has sparked intense debate. This stance is rooted in preserving policy flexibility for economic development, especially in traditional sectors such as agriculture and fisheries. However, as India aims to become a technology-driven economy under its Vision 2047, this approach may hinder opportunities in emerging fields like the digital economy and high-tech manufacturing.

POTENTIAL AND PITFALLS:

  • Policy Flexibility vs. Global Integration: India’s cautious approach to WTO negotiations is driven by a desire to maintain policy flexibility, especially for traditional sectors like agriculture and fisheries. This strategy aims to protect domestic interests and support resource-poor farmers and fishermen by avoiding constraints on financial support. However, this approach may hinder India’s ability to capitalize on emerging opportunities in the digital economy and high-tech manufacturing, which are crucial for its Vision 2047 goals.
  • Economic Growth and Trade-to-GDP Ratio: India’s trade-to-GDP ratio increased from 12% in 2000 to 23% in 2007 and has stabilized at this level. India aims for a 30-35% trade-to-GDP ratio to achieve its ambitious export targets and accelerate GDP growth. This necessitates a shift from a defensive trade policy to a more proactive engagement in WTO negotiations, particularly in high-technology sectors.
  • E-Commerce and Digital Economy: India’s e-commerce market is projected to reach $350 billion by 2030, yet e-commerce routed exports constitute only 1% of total exports. Globally, e-commerce exports are expected to hit $2 trillion by 2030, presenting a substantial opportunity for India. Regulatory reforms promoting digitization, transparency, and operational efficiency are crucial for fostering a conducive ecosystem for e-commerce enterprises.
  • Climate Change and Sustainability: India has committed to achieving net zero carbon emissions by 2070 and has made significant progress in improving energy access and reducing greenhouse gas emissions. However, India’s reluctance to engage in WTO negotiations on climate change could undermine its efforts to align with global standards and benefit from international cooperation in achieving its sustainability goals.
  • Investment Facilitation: In 2022, India secured the third position in attracting foreign direct investment (FDI), following the US and China. India must actively participate in WTO discussions on investment facilitation to maintain and enhance its attractiveness to global investors, ensuring a predictable and stable investment environment.
  • Global Leadership and Multilateral Engagement: India’s active participation in WTO discussions is crucial for building a leadership position in the Global South and ensuring successful bilateral engagements with major markets like the US, the European Union, and Japan. India’s lack of engagement has not deterred other nations from forming a consensus on new regulations, potentially disadvantaging Indian businesses.

THE WAY FORWARD:

  • Active Participation in E-Commerce Negotiations: India should actively engage in WTO’s Joint Initiative on E-Commerce to shape global rules that favor its interests. By participating, India can ensure that the regulatory environment supports its burgeoning digital economy and addresses issues like data protection, consumer rights, and competition.
  • Promoting Digital Industrialization: India should advocate for policies supporting digital infrastructure development, skills training, and innovation. This includes investing in AI, IoT, and 3D printing technologies, which can drive economic growth and job creation. India’s Digital Public Infrastructure (DPI) approach has already successfully promoted innovation and democratized technology, making it a model for further digital industrialization efforts.
  • Engagement in Climate Change Negotiations: India should take a proactive role in WTO discussions on climate change to ensure that global trade rules support its environmental goals. This includes advocating for fair carbon border adjustment measures and promoting green technologies. India’s energy access and emissions reduction achievements provide a strong foundation for leading global climate change initiatives.
  • Investment in High-Tech Manufacturing: India should negotiate investment facilitation agreements within the WTO to attract foreign direct investment (FDI) in high-tech sectors. This includes creating favorable regulatory environments and incentivizing technology transfer and innovation. India’s third position in attracting FDI in 2022, after the US and China, underscores its potential to become a global manufacturing hub.
  • Building Leadership in the Global South: India should leverage its position in the WTO to build coalitions with other developing countries, advocating for inclusive growth and sustainable development policies. This includes addressing issues like digital trade, investment facilitation, and climate change. India’s active participation in G20 forums and bilateral trade negotiations demonstrates its capability to lead and shape multilateral disciplines.

THE CONCLUSION:

To achieve its Vision 2047 and become a developed nation, India must shift from its defensive positions and actively engage in WTO negotiations. Emphasizing digitization, sustainable development, and resilient value chains will bolster its manufacturing sector and global integration. Proactive participation in shaping multilateral trade and investment rules is crucial for India’s economic growth and leadership in the Global South.

UPSC PAST YEAR QUESTIONS:

Q.1 The broader aims and objectives of WTO are to manage and promote international trade in the era of globalization. But the Doha negotiations seem doomed due to differences between the developed and the developing countries.” Discuss from the Indian perspective. 2016

Q.2 WTO is an important international institution where decisions profoundly affect countries. What is the mandate of WTO, and how binding are their decisions? Critically analyze India’s stand on the latest round of talks on Food security. 2014

MAINS PRACTICE QUESTION:

Q.1 Discuss the implications of India’s resistance to expanding the World Trade Organization’s negotiation agenda on its economic development strategies. How can India balance its traditional sectors with emerging opportunities in the digital economy and high-tech manufacturing to achieve its Vision 2047 goals?

SOURCE:

https://indianexpress.com/article/opinion/columns/why-india-needs-to-reset-its-trade-policy-9441271/

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