Reuters
India’s commercial detachment can help him better cause global shocks than heavy export savings
India is the largest fifth and the fastest growth in the world.
However, a recent heritage of protectionism and commercial policies focused on the interior has retained its global competitiveness.
Its prices are high and the share of global exports remains less than 2%. The vast internal market in India has fueled its growth – exceeding many others, according to economists, largely because the rest of the world slows down. But in a turbulent and increasingly protectionist era, India’s instinct for autonomy can be used strangely as a short -term shield.
While countries rush to recalibrate in response to the change in American trade policies – like the last 90 -day pricing break from Donald Trump after weeks of saber – the relative detachment of India may have helped the shocks that have shocks that have deemed more dependent savings in trade.
“The low exposure of India to the trade in world goods could work in our favor. If the economies focused on exports slow down under the pressure of prices, and we continue to grow at 6%, we will start to appear stronger in comparison – in particular with our large domestic market on which to fall back,” explains Rajeswari Sengupta, associated professor of economics in Mumbai Indira Gandhi Institute Sought.
“Transforming trade has become an advantage-but we cannot afford complacency. To seize new opportunities, India must remain agile and open more to gradually and strategically exchange,” she adds.
It may not be easy, given the long and complicated relationships of India with barriers and commercial prices.
AFP
In 2024, India exported $ 89 billion in the American market
In his book, India’s trade policy: the 1990s and beyond, the economist of the University of Columbia and renowned commercial expert Arvind Panagariya traces the complex and often inconsistent evolution of the approach of trade in India.
During the inter -war years, industries such as textiles and iron and steel put pressure for – and received – high levels of protection. The chronic shortages of the Second World War led to even more stringent import controls, applied by an elaborate license system.
While Asian peers such as Taiwan, South Korea and Singapore moved to export strategies in the 1960s – and began to display impressive growth rates from 8 to 10% per year – India has chosen to double import substitution. Consequently, imports as GDP share increased from 10% in 1957-1958 to only 4% in 1969-1970.
In the mid -1960s, India had completely prohibited imports of consumer goods. This has not only deleted the pressure on national producers to improve quality, but also refused them access to inputs and world class technology.
Consequently, Indian products have lost their competitiveness on the world markets and exports have stagnated. The resulting exchange shortages have led to even stricter import controls, creating a vicious circle that has stifled growth. Between 1951 and 1981, income per capita increased at a slow rate of only 1.5% per year.
The turning point came in 1991. Faced with a balance of payments, India dismantled numerous import controls and let the rupee depreciate – a decision that has given an essential boost to exporters and national producers in competition with imports. Import licenses on consumer goods did not end until 2001, after the World Trade Organization (WTO) ruled against it.
The impact was striking: between 2002 and 2003 and 2011-2012, exports of goods and services from India increased from six, from $ 75 billion to more than $ 400 billion.
With the liberalization of trade and other reforms, the per capita income of India increased more in the first 17 years of the 21st century than throughout the 20th century, notes Professor Panagariya.
But the decline in exchanging did not end.
The liberalization of trade in India has been reversed twice – in 1996-1997 and more since 2018 – with in -depth use of anti -dumping measures to block imports from the most competitive sources, according to Professor Panagariya.
“Many post -colonial states such as India are home to a deeply rooted suspicion that international trade and trade are simply new forms of colonization. Unfortunately, this state of mind persists among certain decision -makers – and it’s a shame,” explains Vivek Dehejia, professor of economics at Carleton University in Canada.
Reuters
A diamond factory in Surat – India has exported nearly $ 12 billion in gold jewelry and diamonds in the United States in 2024
Many economists argue that a decade of protectionist policies has underestimated the Make in India initiative of Prime Minister Narendra Modi, which has focused on the high capital intensity sectors and technology while putting the high-intensity of labor like textiles. Consequently, the program has struggled to provide significant gains in manufacturing and exports.
“If foreigners cannot sell us their goods, they will not have income to pay the goods they buy from us. If we reduce their goods, they will have to reduce ours,” wrote Professor Panagariya.
Such protectionism has also led to allegations of cronyism.
“The prices have created protectionism in several Indian industries, disincuring investments in efficiency by comfortable holders and allowing them to regularly collect market power by accumulating concentrated positions”, according to Viral Acharya, professor of economics at the New York University Stern School of Business.
The United States turning to the interior and under pressure, countries belonging to the European Union rush to reliable trade partners – and India could be part. To seize this moment, economists think that India must reduce its prices, stimulate the competitiveness of exports and point out its opening up to world trade.
Sectors such as clothing, textiles and toys have a gold opportunity, especially for the average and small scale sectors. But after a decade of stagnation, the big question is: can they develop-and will the government support them?
If Trump follows its price plans after the current break, India could see a drop of $ 7.76 billion – or 6.4% – from exports to the United States this year, according to an estimate of Global Trade Research Initiative (GTRI), a Delhi -based reflection group. (In 2024, India exported a value of $ 89 billion on the American market.)
“Trump’s prices should make a slight blow to India goods exports to the United States,” Ajay Srivastava from GTRI said.
He underlines the need for India to expand its commercial base after having concluded a balanced agreement with the United States. This includes dropout agreements with the EU, the United Kingdom and Canada, while deepening links with China, Russia, Japan, South Korea and Asean.
At home, a real impact depends on the reforms: simpler rates, a tax on smoother goods and services (TPS), better commercial processes and a fair implementation of quality controls. Without this, India may miss the world’s moment.
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