Trade Policy Insights and Recommendations for India

The Union government should heed the advice from NITI Aayog's CEO, regarding India's international trade policy. His observations highlight critical shortcomings and suggest corrective measures.

Strategic Focus on Asia

• India needs a sharper focus on Asia, including stronger trading relations with countries like China, despite geopolitical challenges.
• Asia is projected to be a major driver of global growth, making regional integration crucial for India.

Challenges with China

• China is the world's second-largest economy, and some countries have a trade surplus with it.
• India's reluctance stems from competitiveness issues, exacerbated by its protective trade policy.
• High tariffs on inputs, such as the 10% tariff on key footwear inputs, reduce export competitiveness.

Trade Agreement Strategy

• India should not limit trade agreements to non-competitive economies as it can hinder competitiveness.
• FTAs with the United Kingdom and ongoing negotiations with the European Union are positive steps.
• India is also negotiating with the United States, but must diversify its trade partners to mitigate unpredictability.

Integration into Global Value Chains

• India is not part of major regional trade agreements, complicating its integration into global value chains.
• Reconsideration of joining the Regional Comprehensive Economic Partnership is advised, despite China's involvement.
• Participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership should be considered.

Importance of Export Expansion

• External demand is crucial for sustaining high growth, as seen in several Asian economies.
• Research from the Reserve Bank of India indicates a significant link between export and fixed investment growth.
• Boosting trade prospects can enhance and sustain growth through various economic channels.