Context: India needs to shed its exaggerated fears of trade agreements to create new jobs.
What are the challenges facing by Indian economy?
- Contracting Economic growth: India is in an economic recession for the first time in its independent history.
- Rising Unemployment: Thousands of people lost their jobs due to the slowing economy in 2018-19 and 2019-20. Unemployment had reached a 45-year high. Added to this worry, more than 2 crore people lost their jobs during the lockdown.
- Rising demand for right to work: During the seven-month lockdown period, there were 11 crore people who asked for work under MGNREGA.
- Stagnating Merchandise Exports: Merchandise goods exports were $314 billion in 2013-14 and remained stagnant for the next five years touching $313 billion in 2018-19.
What are the reasons for stagnating Merchandise exports?
- Reversal in the direction of India’s foreign trade policy with higher tariffs, non-tariff barriers, quantitative limits.
- The return of licensing.
- Border country restrictions.
- The appreciating value of the rupee.
How to boost exports and produce jobs for Indian workforce?
- Investing in labour intensive sectors: Good quality jobs can be created only in sectors that are labour intensive, and where India has a comparative advantage, such as apparel, leather goods, value-added agriculture etc.
- Find more export markets: The job-creating sectors depend not only on the domestic market but, significantly, on export markets. For example, more than one-half of the leather goods and one-third of the apparel produced in India are exported to other countries.
- Encourage and Incentivise exports: Merchandise exports helps to create supporting jobs in warehousing, transport, stevedoring, container stations, shipping, ship chandling, ports and export financing.
Why India cannot persist with protectionism policy?
- Trade is reciprocal: India cannot ‘protect’ its domestic industry with high trade barriers while aspiring for bilateral trade treaties to promote exports. Also, no country will allow import of Indian goods and services unless that country is able to export its goods and services to India on reasonable and fair terms.
- FTA has Benefited its members: More winners than losers because of bilateral and multilateral trade agreements in the recent past witnessed through proliferation of FTA’s such as ASEAN, NAFTA, MERCOSUR, RCEP recently.
- To promote exports: Most manufacturing today has a long supply chain that cuts across many countries. To be able to export goods, India must import raw materials or equipment or technology from other countries in the supply chain.
What are the issues in signing FTA’s?
- FTA provisions were misused by some countries to question the foreign investment policies and tax policies of other countries.
- Purely trade and commercial disputes were dragged to international arbitral tribunals on the pretext of violating FTA provisions.
Exports are one of the main engines to revive economic growth and create many new jobs. India has the immediate opportunity to export goods worth $60 billion in labour intensive sectors which can then create lakhs of new jobs. To revive exports, India needs greater access to global markets. Hence, we must re-learn to engage with other countries and negotiate favorable trade agreements through the bilateral and multilateral routes.