India's trade negotiations and trade agreements with countries and multilateral organisations are lacking meaningful progress.
It is vital that India addresses the constraints in its import policy to achieve its goals in manufacturing.
What are the concerns?
India is unable to decide on how to proceed on pending FTAs with the European Union, Australia and Canada.
It is unable to generate interest among members at the RCEP, on its demand for greater market access in services.
It is also not finding takers for its proposals on trade facilitation agreement on services in WTO.
Evidently, India is out of sync in various trade negotiations.
Indian policy on free trade agreements (FTAs) and, more generally, over the country’s external trade policy remains confused.
How is nature of India's economic integration a reason?
Globalisation - As the world globalised from the 1980s onwards, production begun getting offshored.
This happened primarily with developed economies outsourcing several key functions to developing countries.
Many developing countries benefited by this by picking up labour-intensive outsourced manufacturing.
Manufacturing - India, too, benefited, but not as extensively as many other developing countries.
In the manufacturing side, India could not exploit the offshore opportunities because of -
limitations on expanding the scale of production
difficulty in accessing cheap credit
lack of adequate labour with the right skills
Services - India, however, benefited significantly from globalisation and outsourcing with respect to services.
It picked up global outsourcing in information technology (IT), communication and financial services from developed nations.
Businesses in the advanced countries' markets invested huge sums in software, digital technology applications and new financial products.
Certainly, India became one of the largest suppliers of specialists in these areas.
Complemented by easing labour mobility with globalisation, India could get to its current status of being the largest remittance recipient.
The Anomaly - The service-oriented pattern of India’s economic integration greatly influences India's vision of trade and FTAs.
Many developing countries being primarily manufacturing exporters, aggressively push for greater liberalisation in market access for manufacturing exports.
India, on the other hand, differs with its demand for liberal market access in services, particularly movement of skilled professionals.
The relative contrasts often become sources of contestation in trade negotiations between each other.
How is India's approach to imports a reason?
India has a peculiar mindset that exports are good, but imports are bad.
The concerns with foreign exchange and imports being injurious for prospects of domestic industry perpetuate the notion of imports being bad.
This translates into its policies of maintaining high tariffs on several products, including those that are necessary for manufacturing exports.
Markedly, many Asian countries, including those in RCEP, have lesser or zero tariffs across the entire spectrum of manufactured products.
This characteristic makes them far more receptive to imports compared with India.
However, they are hardly as receptive when it comes to service imports, particularly labour movements from other countries.
What lies before India?
The nature of economic integration and its peculiar mindset with imports keep India’s prowess as a manufacturing exporter weaker.
While aspiring to be a global manufacturing hub, it is essential that a more liberal import policy be put in place as a prerequisite.
This is crucial to allay other countries' suspicions on signing trade agreements with India.
