India’s Mask of Economic Liberalism is Off

Context: India’s disapproval of Free Trade Agreement (FTA) and globalization is an attempt to shield the domestic industry from competition by putting up protectionist barriers.

Arguments provided for not joining FTA: like that of Regional Comprehensive Economic Partnership (RCEP)

• To shield the domestic industry: Trade agreements have been running in the name of openness but simultaneously allowing subsidies and unfair production to prevail.
• De-industrialization: The e?ect of past trade agreements has been to de-­industria­lise some sectors, and India’s interests were compromised by doing business as per the ‘framework’ set by others.

Issues with Indian Trade Policy:

• Sustained Economic Illiberalism:
  • According to the World Trade Organisation (WTO), India’s applied most favoured nation import tari? are 13.8%, which is the highest for any major economy.
  • According to the United Nations Conference on Trade and Development, on the import restrictiveness index, India ?gures in the restrictive category.
  • From 1995­2019, India has initiated anti-dumping measures 972 times.

Arguments for joining FTAs and supporting economic globalization

• India cannot be a part of global value chains: Since FTAs are the gateways for international trade, in the absence of strong trade multilateralism regime at WTO, investments to India remains unattractive.
• India has benefitted from FTA’s in the past: according to the Economic Survey 2020.
• Benefits form economic globalization: Post­1991, the Indian economy grew at a faster pace:
  • Reduced poverty: in rural and urban India, which stood at close to 40% in 2004­05, almost halved to about 20% by 2011­12.
  • Economic Growth: India clocking an average economic growth rate of almost 8% with international trade being a major engine of progress.

Conclusion: Economic liberalism (reducing tariff and signing FTAs), is must for making India a global destination for foreign investment/global manufacturing hub.