India's Integration in Global Trade
India has been integrating into the global economy through goods, services, and financial flows. While it has excelled in services and financial flows, the goods trade presents a potential area for growth to boost its GDP.
Challenges in Goods Exports
- Goods exports grew at only 3% annually from 2014 to 2024, down from 17% in the previous decade.
- Protectionism increased as average import tariffs doubled from 6% in 2013 to 12% in 2023.
Global Context and Opportunities
- China's share in global goods exports increased from 4% in 2001 to over 14% in 2024 but faced accusations of violating WTO rules.
- The "China+1" strategy post-Covid saw manufacturers diversify supply chains, benefiting countries like Vietnam, though India lagged due to policy hurdles.
- India's goods export share remained flat at around 1.7–1.8% from 2017 to 2023, while Vietnam's share increased from 1.5% to 1.9%.
- US trade policy shifts with potential tariffs on 16 countries present India with a chance to expand its goods trade role.
Strategic Objectives for India
India needs to focus on two key goals: maintaining market access and increasing its share in global manufacturing trade.
- Securing a favorable trade deal with the US would give India an edge, though existing lower tariffs provide current advantages.
- Opportunities arise in progressing trade with the UK, EU, China, and ASEAN, alongside reviving bilateral investment treaties.
Policy Reforms and Challenges
- Despite initiatives like Make in India and production-linked incentives, manufacturing's GDP share remains stagnant at 17%.
- Private investment is weak, with FDI inflows falling to 2.3% of capital formation in 2024 from 8.8% in 2020.
- Policymakers need to simplify business hurdles, reduce bureaucratic costs, and ensure a stable policy environment to attract investment.
Conclusion
The global trade landscape, reshaped by the US-led trade war, offers India an opportunity to enhance its global manufacturing presence. Focusing on long-term strategies is crucial to achieving its goal of becoming a developed nation by 2047.