The Ministry of Commerce and Industry announced India’s Foreign Trade Policy 2015-2020 on 1 April 2015. The new policy aims to raise exports and make India a formidable global trading partner by 2020. Akshay Mathur, head of research and geoeconomics fellow at Gateway House, comments on the key features of the Foreign Trade Policy.
Statement:
“On 1 April 2015 the Indian government announced a prudent and carefully crafted foreign trade policy. The policy acknowledges the challenges that India faces, both externally and internally, in becoming a global trading power.
The search for new markets such as Latin America, Africa and CIS is obvious and timely as India’s traditional export destinations such as the U.S. and Europe are still recovering from the financial crisis. However, Indian business will remain hesitant in investing in CIS and other Central Asian countries until India’s connectivity with these areas improves and sanctions against Iran and Russia are removed.
The acknowledgment that India is being left out of global mega trade agreements such as the Trans-Pacific Partnership indicates that the government is taking those developments seriously. Not only does India risk losing export markets if those agreements come through, but it will also be left out of new trade paradigms that these agreements are introducing such as the focus on harmonising sub-national regulations on intellectual property, environment and labour.
Hence, the focus on improving the domestic environment by streamlining schemes and developing competitive products is appropriate.
Similarly the focus on Services, which is India’s key competency, is timely. The free trade agreement in Services with ASEAN is expected to be a game-changer.
However, the foreign trade policy cannot be looked at in isolation – it’s alignment with India’s economic diplomacy goals is not clear and is thus likely to diffuse the efforts for India to have a comprehensive and powerful foreign policy.
The government has also not been explicit about the support for small and medium enterprises which create 1.3 million jobs every year and contribute to 45% of the country’s industrial output.”
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