Thursday, April 21, 2016

World trade and India

The storm of liberalisation, privatisation and globalisation that started blowing across the world from the 1980s was so strong that all the standards and benchmarks of world trade underwent a metamorphosis. If a nation wanted to become prosperous, it became not only important but also mandatory that its economy integrated, or tried to integrate, with the 'world economy'. India undertook reforms in several local rules and regulations to ensure this. It is a separate matter altogether that pressurised by several factors acting in tandem, we undertook economic liberalisation from 1991. Prime Minister Narasimha Rao undertook systemic reforms on such a scale that the entire industrial landscape of India began transforming. The Chinese dragon, under the leadership of the dynamic Deng Xiaoping, had realised the need for comprehensive reforms much earlier starting 1979 and had unleashed the wave of change starting from the Special Economic Zones located in the south-eastern coastal regions. That very nation is the source of the biggest headache for us today, when it comes to trade deficits.

China Deng Xiaoping SEZs India PT education PT's IAS Academy Sandeep Manudhane SM
The SEZ miracle of Deng

So we woke up from our slumber in 1991. Now the licence-quota-permit Raj in place since the 1950s was on its way out, and quality-based, research-oriented and entrepreneurial-energy driven products and services alone were to flourish in the markets. The good part was that India was a part of the World Trade Organisation (WTO) right from its inception in January, 1995. We had also hoped that the South Asian Association for Regional Cooperation will boost our trade volumes, and our global exports will fly. Every government that came after it pushed the agenda of reforms further. But today, after all these attempts and experiments, our position in world trade remains extremely delicate. It can be attributed to five primary causes, and the solutions lie within those problems.

First, India's share in global annual world trade is less than a measly 3 percent. While there are multiple historical reasons for it, a nation that is home to 18% of world population will lose out significantly in such a scenario. This percentage has to be grown anyhow. Several policy changes are being undertaken even now. These will lead to more business and newer jobs in the country too.

Second, the pathetic state of our exports. If we examine closely, then barring the Information Technology exports where we rock, the condition of our merchandise trade is not too good. Two prime reasons explain this situation - our huge domestic market that makes it easy for even low-quality goods to get absorbed quickly, and our relatively small manufacturing base. We need to improve on both these parameters. Perhaps that is why the government is pushing ahead with its 'Make-in-India' programme with such urgency.

Third, and an important reason, is our introverted nature. This is quite surprising given the fact that our ancestors in the Indus Valley civilisation were great traders, who 5000 years ago would roam thousands of miles in boats without engines. The Silk Route also had India as the most prominent player after China. Then, despite us claiming upto half the world's GDP, we just lost our way. Today is the time to recover that lost glory in the truest sense of the word. We need to work on transforming our mindset. The fame that Ayurveda and Yoga enjoy should find its reflection in our exports as well.

Fourth is the compulsion with which we have resorted to the legal safety measures - pressed by our huge population numbers and omnipresent poverty - that angers our Western partners on fora like the WTO. For example, consider the 'compulsory licensing' norms in Pharma sector, or the 'public stock-holding programmes' in the public services sector. Our trade relations have continuously soured due to this. And simultaneously, the size of trade among the south Asian nations has been so small that no major benefit can be expected from it. Till the time Pakistan does not open its doors whole-heartedly for business with India, we are not going to benefit at all.

The fifth emerging challenge is the eagerness of America to rapidly conclude new mega-trade deals like the TPP (Trans Pacific Partnership) and the TTIP (Trans-Atlantic Trade and Investment Partnership). These would be the new giant trade bloc that would exclude India, and whose regulations, especially pertaining to the Intellectual Property Rights (IPR), would be so stringent as to make our present system look completely anachronous. We need to immediately improve our local IPR structures, including making the administrative and judicial machinery fast enough to dispense effective justice quickly, so entrepreneurs launching innovative products through original research are not frustrated.

The constantly growing youth population and the need to generate new jobs reminds us time and again that we must use opportunities to augment our world trade quantum. In such a scenario, the new rays of hope visible now are the mega-ambitious infrastructure programmes of the government of India like Sagarmala, Bharatmala, High-Speed Rails, Industrial Corridors etc. that hold in them the potential to totally transform India upon fruition. We will need to restructure the entire educational structure of India in such a manner that the needs and imperatives of world trade start reflecting in the study-patterns and examination system of our students. That alone will ensure a steady supply of trained manpower so essential to make these government plans a reality.

Quality in all we do, an extroverted mindset, and the insuperable desire to have our flag flying high across the world alone can transform our genuine potential into trade numbers. It would benefit everyone. Vasudhaiv Kutumbakam (the world is one family) can include trade also, in addition to the staple ingredients love, compassion and trust. After all, it is only when we multiply our per capita incomes by a factor of 3 or 4, will be reach a moderate prosperity level.

[ This article in Hindi originally appeared here ]
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mehtan said...

Excellent, as always...

Unknown said...

Yes,we have liberalized our goods and services market and saw a boom in the services sector but now we have to liberalize the factors of production i.e the land, labor and capital and now a days entrepreneurship to create jobs in the manufacturing sector. A country having 17% of world's brain but produces less than 2% of innovation.As per Angus Madison,India contributed 35% of world G.D.P in 17 th century,now we should endeavor to make India ofcourse not a golden bird(as we are) but a diamond sparrow.

Satyavir yadav said...

I learned that india has huge potential to influence the country as it did in IVC period but now there is problem with lack of intellectual people just because of our education standard.Our education just providing us degrees not brain.we should improve our education infrastructure and other infrastructure like ports upgradation,road upgradation for speedy delivery of goods and services which is a long run solution along with we should focus on short term reliefs (which I don't know)