Trade policy cannot be delinked from manufacturing policy, investment policy, and industrial policy: Commerce Secretary
There is plenty for us to exploit in the global marketplace in terms of trade: Dr Arvind Panagariya
“Trade policy cannot be delinked from manufacturing policy, investment policy, and industrial policy,” said Shri Sunil Barthwal, Secretary of the Department of Commerce, Ministry of Commerce and Industry, Government of India. He further stated that these policies need to be designed to drive economic growth and support India’s journey towards becoming a developed nation by 2047.
He highlighted that for trade to occur, India must establish competitiveness in both manufacturing and services. In services, India has performed exceptionally well, and by 2030, we aim to reach USD 1 trillion in services trade. Schemes like PLI have been implemented to enhance manufacturing capabilities and stimulate exports. Over the past few years, exports have grown from USD 59 billion to USD 87 billion.
On FTAs, he added, “Our FTA strategy is fully aligned with the Government of India’s industrial policy, which states that our industry should grow alongside our competitiveness, and our trade policy is fully aligned with the goals of industrial development.” He also emphasized that FTAs are one of the key means of economic integration between two countries.
“There is plenty for us to exploit in the global marketplace in terms of trade,” said Dr. Arvind Panagariya, Chairman of the 16th Finance Commission of India and Professor of Economics and the Jagdish Bhagwati Professor of Indian Political Economy at Columbia University. He made this statement during the session on ‘Integrating Industrial, Investment, and Trade Policies: A New Paradigm for India’ at the Global Economic Policy Forum 2024, organized by the Department of Economic Affairs, Ministry of Finance, Government of India, and the Confederation of Indian Industry (CII) today.
He added that while the world is turning protectionist and automation will lead to the reshoring of manufacturing, export opportunities would still exist because while protectionism has been on the rise, global markets are more open than ever. Today, the global market for merchandise exports is valued at USD 25 trillion, and services at USD 7 trillion. Second, although capital has been replacing labor in manufacturing activities, it hasn’t limited employment opportunities or the relevance of trade.
He further emphasized that “in today’s world, the relevance of ‘free-er’ trade is even greater than it was in the past. The reason is that the global market is large, and in addition to innovation, it has become feasible to subdivide production activities into more and more sub-activities, which can be relocated to anywhere in the world where production costs are lowest.
He added that if we want MNCs to come to Indian shores, we need to offer them access to a frictionless, large space where products, processes, etc., can move freely. For this, India needs FTAs with the EU, the UK, and other countries like the ones we already have with Australia.
Shri Dammu Ravi, Secretary of Economic Relations, Ministry of External Affairs, Government of India, discussed the complexities of supply chains. He explained that supply chains operate in three dimensions—domestic, regional, and global - and stressed the importance of understanding the complexities within domestic supply chains.
He noted that recent disruptions to supply chains, such as the COVID-19 pandemic, geopolitical tensions, red sea attacks, and rising logistics costs - have underscored the need for diversified supply chains. He highlighted that in the short and medium terms, each sector should develop resilient supply chains, but for the long term, supply chains must evolve from being resilient to competitive. He also pointed out that global supply chains require open policies that embrace globalization, and that India needs to develop its own supply chains, which will require building a robust domestic ecosystem.
Prof. C. Veeramani, Professor and Director of the Centre for Development Studies, discussed the interplay between industrial and trade policies. He remarked that in recent times, both advanced and developing countries like India have seen a resurgence of industrial policy. However, he cautioned that if industrial policies are not properly designed and implemented, they could lead to significant costs.
He also pointed out that exporting is no longer the sole objective, and thus, the design of industrial policies needs a fundamental rethinking.
Dr. Naushad Forbes, Past President of CII and Co-Chairman of Forbes Marshall moderated the session and, in his remarks, mentioned “in economics, a tax on imports is effectively a tax on exports, and economic models have shown this. Countries actually benefit from imports, and the people of a country benefit from imports.”
12 December 2024
New Delhi