Adopt a Clear Strategy to Raise our Trade Intensity

Context: As global trade is poised for a rebound in 2021, India must get its act together to make the most of it. We should watch our currency closely and not get left behind on free-trade deals.

Background:

Concerns for Indian trade:

• Declining domestic demand in the backdrop of covid-19.
• Declining trade and exports: The World Trade Organization (WTO) had projected global merchandise trade volumes to fall 9.2% in 2020, and Indian exports have fallen in three of the last six years.
• Monetary easing in the US: under its depreciatory tactics leads to a rise in prices of Indian rupee impact exports from India.

Positives for global trade:

• For 2021, the World Trade Organisation (WTO’s) forecasts a 7.2% increase in trade volumes.
• Possible restarting of WTO’s dispute resolution mechanism: with coming of the new administration in USA, and withdrawal of mercantilism that was portrayed by its predecessor.
• New wave of globalization: The European Union (EU) -China Agreement opens up Chinese markets for European investment and grants China easier access to EU markets.

Way forward:

• India should either strike alternate deals or prepare to join Regional Comprehensive Economic Partnership (RCEP) at some stage ahead.
• Prepare a cohesive trade strategy: that goes beyond internal export-incentive schemes.
• Promote an export-led economic growth (as suggested by the Economic Survey 2020): Increase India’s share in global trade to more that 2% in the short term before aiming for double-digit growth.
• Focus on rupee management: with an aim to ensure export competitiveness.