Context:
The economic body in Economic Survey 2024-25 demands a “new strategic trade roadmap” to revive the export competitiveness of India in this scenario of turbulence across the global front, new protectionism emerging everywhere, and the dynamics of trade changing quite dramatically.
Challenges to export competitiveness:
- Increasing Protectionism and Uncertainty
- The global trading protectionism along with the recently witnessed Russia-Ukraine conflict is on the increase.
- Non-Tariff Measures
- While tariffs have declined, other non-tariff policy measures, those that are health- and environment-related, for example, continue to proliferate. NTMs, supposedly directed at issues of public security, raise the compliance cost of exporters.
- For example, the newest ones that have been introduced lately but for which implementation begins soon are both the CBAM under the EU and the EU Deforestation Regulation (EUDR) of the EU.
- These headwinds can constrain India’s exports, particularly to the EU, and increase the current account deficit.
Quality and Efficiency.
- Even amidst these headwinds, India can still enhance its share in world markets by enhancing quality and efficiency.
- Survey asks India to remain competitive, reduce trade costs, and enhance global supply chain participation.
FDI Trends
- Net FDI declined:
- The net FDI during the survey went down mainly because of the following head/heads exit of the successful foreign investment, other attractions to their investments in countries within the geographical borders; interest rate increase outside; still, the gross inflow of foreign direct investment posted the growth of 17.9 per cent and its year over year value reached US $55.6 bn.
Dependency on China
- The China Domination process and energy transformation system is exposed in the manufacturing chain. For instance, disruption, price level volatility, as well as fluctuations in exchange rates, may happen to India since many Indian industries rely on the Chinese value chains for acquiring solar equipment.
- This is yet another area wherein China’s energy and manufacturing industries, like their counterpart in India, face the headache of being critical minerals-dependent.
- China is now producing an alarming percent of the world production of nickel, cobalt, lithium, and rare earth minerals.
Evolution of India’s Tariff Policies
- Lowered Tariffs: The import tariff rates of India are reduced from 48.9% in 2000 to 17.3% in 2024, a step towards free trade and global integration.
- The Survey underlines the balance of domestic protection and the need of global economic integration so that tariffs become rationalized to benefit the key sectors without inverted duty structures.
