INDIA & FTA- Economic globalization & Protectionism
While India is surely a much more open economy than it was three decades ago, globally, India continues to remain relatively closed when compared to other major economies.
- Refusing to sign RCEP — a sign of weakness, not boldness.
- India is now truly at the margins of the regional and global economy.
- With trade multilateralism at the World Trade Organization (WTO) remaining sluggish, FTAs are the gateways for international trade.
- By not being part of any major FTA, India cannot be part of the global value chains.
- India’s competitors such as the East Asian nations, by virtue of they being embedded in mega-FTAs, are in a far superior position to be part of global value chains and attract foreign investment.
Impugning FTAs for deindustrialization means being oblivious to the real problem of the Indian industry— which is the lack of competitiveness and absence of structural reforms.
Economic Globalization has benefitted India:
- Post-1991, the Indian economy grew at a faster pace, ushering in an era of economic prosperity.
- Poverty in rural and urban India, which stood at close to 40% in 2004-05, almost halved to about 20% by 2011-12. Because India clocking an average economic growth rate of almost 8% with international trade.
Ideological Economics of the Modi Government: Swadeshi and Vocal for Local
- Narendra Modi government has started walking on the path shown by its ideological gurus.
- Tariffs have been increased, FTAs are being demonized, and ‘vocal for local’, which strikes at the heart of international trade and globalization, is the new mantra.
- Government shielded the domestic industry from competition by putting up protectionist barriers.
- United Nations Conference on Trade and Development, on the import restrictiveness index, India figures in the ‘very restrictive’ category.
- From 1995-2019, India has initiated antidumping measures 972 times (the highest in the world), zealously endeavoring to protect domestic industry.
The Prime Minister’s desire to make India a global destination for foreign investment is a pipe dream because it is naïve to expect foreign investors to be gung-ho about investing in India if trade protectionism is the government’s official policy.
The mask of economic liberalism is finally off and the real ideological colors are there for everyone to see.