The following is a brief introduction to the topic:
For any economy, trade agreements and policies are crucial as they guide its relations and commerce with other countries. India is the 2nd most populated country in the world, and it’s a key player on the international market. Therefore, the importance of trade agreements for India and its economic growth and relations with other countries are significant.
1. History of Indian Trade Policy
The Pre-Independence Era
- Colonial Influence India’s economic policies have been shaped by British colonial rule. They are based mainly on the export of raw materials and importation of finished goods.
- Limitation of Infrastructure The infrastructure development was very minimal and focused more on British economic needs than local development.
Post-Independence Era
- Initial Protectionism: India’s post-independence policies were dominated by protectionist measures, which emphasized self-reliance, import substitution, and industrialization.
- First Industrial Policy Resolution (1948): Aiming to create an economy that is both public and private, by promoting industries such as energy, steel and transport.
1.3 Liberalization of the Economy (1991 and Later)
- New Economic Policy, 1991 A paradigm shift was marked towards Liberalization, Privatization and Globalization (LPG).
- Reduced Tariffs Encouragement of foreign trade through reductions in tariffs, quantitative restrictions and other measures.
- Foreign Direct Investment (FDI): Liberalized regulations to encourage foreign investment in various sectors.
2. Current Trade Policies
2.1 Foreign Trade Policy (2015-20)
- Export Promotion Exports are promoted through MEIS (Merchandise Exports from India Scheme) and SEIS (Service Exports from India Scheme).
- The ease of doing business Simplificating procedures and reducing costs of transactions to improve the ease of business.
- Focus Areas Export promotion has given priority to textiles, gems and jewellery, IT, agriculture and pharmaceutical industries.
Make in India
- Objective: Encourage manufacturing in India through various incentives, and by creating an enabling environment.
- Focus on Sectors: Focused on 25 different sectors, including electronic products, renewable energy, automobiles, and pharmaceuticals.
Digital India
- Digital Infrastructure Improved digital infrastructure for ecommerce and digital trading.
- Digital Literacy Increasing digital literacy for small and mid-sized enterprises (SMEs) to be able to participate in global trade.
3. Important Trade Agreements
3.1 Bilateral Trade Agreements
- India-US Trade Relations: Trading goods and services, with special emphasis on technology, agriculture and defense.
- India-Japan Comprehensive Economic Partnership Agreement (CEPA): The two countries can now benefit from economic co-operation and access to the market.
Multilateral Trade Agreements
- South Asian Free Trade Area Promoting intraregional trade between SAARC member countries.
- Free Trade Agreement between ASEAN and India: Aim to improve trade and economic co-operation with ASEAN nations.
3.2 Regional Comprehensive Economic Partnership
- Background: RCEP, or the Regional Comprehensive Economic Partnership (RCEP), is a proposal for a trade agreement that would be signed between ASEAN members and their six FTA partner countries.
- India’s Stand: India withdrew from the Agreement in November 2019 due to concerns about the deficit of trade and the protection of domestic industries.
4. Effects of trade policies
Positive Effects
- Economic Growth The liberalization of the economy has contributed to economic development and growth.
- Exports to increase: The reduction of trade barriers led to an increase in exports.
- Foreign Investment: Global companies have been attracted by liberal FDI policy, leading to the creation of jobs and transfer of technology.
4.2 Challenges
- Trade Deficit: A persistent trade deficit with China and other countries.
- Protecting the Domestic Industry Balance between the protection of domestic industries and compliance with global trade standards.
- Non-Tariff Barriers: Non-tariff trade barriers that prevent Indian goods from reaching the global market.
5. Future perspectives and recommendations
Strengthening domestic Capabilities
- Innovation and R&D: To improve global competitiveness, focus on research and innovation.
- Skills Development: Investment in skills development aligned with the global market requirements.
5.2 Enhancing Trade Diplomacy
- Forums on Global Trade: To protect national interest, active participation in global trading forums like WTO.
- The New Market: Explore new markets, such as in Africa, Latin America and other areas, to diversify your export destination.
FAQ
1. What are the major objectives of India’s Foreign Trade Policy for 2015-20?
Answer:
India’s Foreign Trade Policy 2015-20 is primarily focused on increasing exports by promoting textiles, pharmaceuticals IT, gemstones, jewelry, and other sectors.
2. Why did India choose to opt out of Regional Comprehensive Economic Partnership(RCEP)?
Answer:
India opted to withdraw from RCEP because of concerns regarding the impact of RCEP on the domestic industry, the fear of an increased trade deficit and to protect its local farmers.
3. What has been the impact of economic liberalization on India’s trading?
Answer:
India has benefited from economic liberalization by increasing trade, decreasing trade barriers, attracting direct foreign investment, stimulating growth and more fully integrating India into the global market.
4. What are the major objectives of the “Make in India” initiative?
Answer:
This initiative, titled ‘Make in India,’ aims to promote manufacturing in India, by offering incentives and improving business conditions, while focusing 25 key sectors in order to increase employment and decrease imports.
5. What are India’s challenges in terms of trade policy?
Answer:
The challenges include tackling a persistent deficit in trade, protecting the domestic industry while adhering to global standards, and eliminating non-tariff obstacles that prevent Indian products from accessing markets.
6. What is the impact of Digital India on international trade?
Answer:
Digital India’s goal is to enhance digital literacy and improve the digital infrastructure of India. This will allow for a smoother global trade.
7. What is the role of FDI in India’s Trade Policy?
Answer:
FDI has a vital role to play in India’s trade policy. It is responsible for attracting investment, creating employment, promoting technology transfers and enhancing domestic industry’s ability to compete on a global scale.
8. What is South Asian Free Trade Area or SAFTA?
Answer:
SAFTA (South Asian Free Trade Area) is a free trade agreement that was signed by the SAARC member countries. It aims at promoting intraregional commerce, reducing trade obstacles and establishing a framework for South Asian economic cooperation.
9. What are India’s trading relations with USA?
Answer:
India-US Trade Relations focuses on exchanges of goods and service, with particular emphasis placed on defence, technology, agriculture, and other sectors. Both nations have taken part in bilateral trade talks to increase economic co-operation.
10. What can India do to improve its diplomatic efforts?
Answer:
India’s trade diplomacy can be strengthened by participating actively in global forums, such as WTO. This includes negotiating favorable agreements with other countries, exploring new market opportunities, and aligning domestic policies to international trade norms.
Understanding the details of India’s policies and agreements can help stakeholders better understand the complexity of international trade. This will ensure that India remains a world economic leader.
