Everywhere, the struggle to get over the unprecedented scenario arising out of the Covid-19 pandemic continues. As economies of the world are integrated and intertwined through global value-chains, none of the economies has remained unaffected; India is no exception. Let us weigh how India’s global trade has fared during the pandemic, and the long, stringent lockdowns that have followed in its wake. India’s exports and imports (both merchandise and services), estimated at $141.82 billion and $127.76 billion, respectively, during April-July FY21, have contracted by 21.9% and 40.7% when compared to the same period last year. This unequivocally points to the saga of how badly the pandemic has impacted India’s global trade.
A broader trade policy review is what India needs at this juncture, for speedy recovery amidst changing dynamics of trade policies globally.
The weakening of WTO is a clear signal that multilateralism is being overtaken by unilateralism, bilateralism and economic nationalism. Besides, stronger involvement of the state in the economy and weaponisation of trade policy to achieve economic and geopolitical objectives are weakening the global trade order—especially the multi-lateral rules-based order.
With this backdrop, a broad review of trade policy in India could be of immense value in reviving trade. The review may, inter alia, consider certain measures to catalyse global trade growth.
The trade policy framework could be made more resilient and strategic to strengthen internal and external dimensions. Dependence on imports for supply of fuels, electronic goods, cell phones, machinery, telecom equipment, pharma ingredients, chemicals, vehicles, etc, should be analysed to explore the possibility of import substitution through domestic production. Whatever India imports may not be produced domestically; however, self-sufficiency can be achieved for commodities of critical importance. Also, the clarion call for ‘Atmanirbhar Bharat’ requires strategic engagement with trading partners to create synergy and reducing dependencies and vulnerabilities for critical supplies. To achieve this, supply-chains need to be robust and resilient.
With WTO’s weak trade governance, India may look for bilateral and plurilateral trade alliances by carefully analysing the pros and cons.
SMEs in India are contributing significantly to employment generation, exports, innovation and inclusive economic growth. SMEs account for 45% of industrial production, 40% of total exports and also significantly contribute to GDP. Therefore, it is of utmost importance that market access and better trade facilitation for SMEs are provided in the partner countries. Further, higher costs of trade be reduced by ensuring access to information on potential suppliers and overseas business partners, sectoral export promotion through export promotion schemes of the foreign trade policy.
The Covid crisis has turned a boon in disguise as it has accelerated the digital revolution. With no other option available, businesses are proactively using e-commerce, e-services, etc, for their functioning. Digital trade has taken a prominent position, and these trade practices will likely continue. Notably, the contribution of digital trade in facilitating global value chain and developing innovative products and services cannot be undermined. India has provided a robust policy framework for effective data privacy and protection and regulating digital services. Besides, new technologies involving artificial intelligence, block-chain, 3D printing, etc, are rapidly influencing the way trade has been done.
While e-commerce negotiations are on in WTO, India has chosen to stay away. Nevertheless, India is formulating a revised e-commerce policy. Therefore, harmonising e-commerce policy for integration with a larger group of countries will mitigate the risk of isolation and promote e-commerce trade.
Fairness is one of the cornerstones that supports the edifice of trade. However, India has to be wary of possible abuse by unfair, hostile and uncompetitive trade practices. The post-Covid-19 times may likely witness some countries resorting to unfair trade practices through state intervention. This will require a careful assessment of how they can impair our trade interest and what appropriate measures can neutralise such practices.
Source : PTI