Economic Times, March 27, 2023
By Pradeep S Mehta & Gopal K Agarwal
At the 2023 ET Global Business Summit last month, Prime Minister Narendra Modi spoke about the nation passing through an ‘era of reimagination’ – how India has been reimagining and reinventing each aspect of governance. This reimagining process must now be extended to India’s outlook on international trade.
Any country’s trade policy is an intricate blend of priorities and concerns in the realms of the domestic and international, the economic and political, and producer and consumer interests. Trade policy is shaped by the economic path pursued by a country. Given the scale and complexity of India with so many different interests pulling in different directions, all the various moving parts of the economic and trade policies, as well as these systems as a whole, need to tread a fine balance in the pursuit of effective and equitable economic growth.
Positions on international trade do not feature prominently in Indian elections, and are generally subsumed within larger economic policy debates. Notably, GoI’s trade policy-related initiatives of late have been significantly more far-reaching than earlier.
Since 2014, GoI’s policy measures have directly contributed to facilitating trade flows. These include the Single Window Interface for Facilitation of Trade (SWIFT), Indian Customs Electronic Data Interchange Gateway (ICEGATE) and eSanchit, Authorised Economic Operators (AEO) programme, Risk Management System (RMS) and direct port delivery and direct port entry to reduce release times and trade costs. Production-linked incentive (PLI) schemes were brought in to attract investments and enhance manufacturing, with positive spillovers expected in terms of greater export outputs and jobs.
India’s export control framework for regulated goods has been streamlined, while monitoring foreign trade performance made effortless through the NIRYAT (National Import-Export Record for Yearly Analysis of Trade) portal. A new foreign trade policy and an overhauled framework for special economic zones (SEZs) are in the works. These have been complemented by ironing out infrastructure and logistics-related issues through the unique PM Gati Shakti National Master Plan and National Logistics Policy.
As these schemes and initiatives are implemented, some course correction and tweaks may be required to correct discrepancies and help realise their full potential. This aspect, combined with the conceptualisation of these programmes that reflect a long-term vision of trade-led economic growth, certainly represents a ‘reimagination’.
Apart from domestic policy actions, GoI has also shown particular intent to begin to reimagine long-held stances on international trade negotiations, both in multilateral and bilateral formats. In June 2022, contrary to widespread expectations that India would act as an obstructionist power and derail WTO’s 12th ministerial conference, India, in fact, demonstrated leadership and played a constructive role. India was instrumental in helping forge a consensus, ensuring that WTO was able to deliver on a limited package. This move asserted India’s role as a responsible power in trade multilateralism.
Even more notable has been India’s recalibration of its approach towards free trade agreements (FTAs). This is best captured in foreign minister S Jaishankar recent observation that ‘India’s new approach to trade agreements addresses issues of non-tariff and behind-the-border barriers, quality standards and related benchmarks’.
Such pragmatism is encouraging, and will hopefully result in more focused approaches to seal trade pacts with wider scope and deeper commitments. India is vigorously pursuing FTA negotiations with partners including the EU, Canada and Britain, among others.
So, what should the onward path in this reimagination of trade policy look like? A period of reforms-beget-reforms is more desirable than a crisis-beget-reforms situation. However, securing political and wider societal buy-in is the foremost prerequisite for any economic reform. This is particularly true for reforms relating to trade policy, which are often seen as sensitive for various sectors of the domestic economy.
So, building a supportive narrative on the transformative potential of trade for economic growth to achieve such societal buy-in for trade must be a priority. This requires GoI to treat all stakeholders as partners in the reform process and convince them of the real and net gains from trade liberalisation and economic reforms. This would truly be a reimagination of the trade policy discourse in India.
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