Indian Economy – A New Confidence in Free Trade Agreement
For India having a population of 1.3 billion people, its economy stands very poorly by per capita income. No doubt, India is a poor country having the largest number of poor in the world living here. Even cumulatively its present GDP of nearly $ 3 trillion is nowhere near US and China. However , India is close to the fifth rank in the world by nominal GDP and by PPP GDP it is the third ranking economy in the world. That makes India, along with its third largest military, a noteworthy country in the world.
I had mentioned a few days back that the resilience of the basic structure of Indian economy has bewildered many in the world. Even the revised lowered forecast for GDP growth for 2022–23 is around 8%. This makes it the fastest growing big economy in the world. The estimate for the GDP for the last financial year was $3.12 trillion, breaking the psychological barrier of 3 trillion. The GST collection for last month was Rs 1.68 lakh crore, an all time record . Manufacturing has improved drastically and the exports increased by 46.53% to reach a new high of $417.81 billion. Imports also increased to $610.22 billion. India is expected to attract $100 billion foreign direct investment (FDI) in 2022-23 on the back of economic reforms and ease of doing business in recent years.
For the four decades after Independence India followed a conservative policy of protectionism in trade and industry by discouraging competitive imports. This created an inefficient and small industrial base in India which was averse to any outside competition on prices and quality. Liberalisation under Narsimha Rao opened the markets but instinct of protectionism often starts reflecting in decision making. Modi government has given the slogan of Aatma Nirbhar Bharat which in certain sectors has given protection to Indian manufacturing by raising the wall of tariffs on such items. This is only for political expediency just as are giving subsidy, giving free electricity and waiving loans. This runs counter to the development of economy in long run
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It is in this background that India has been reluctant in entering into agreements of free trade agreement (FTA) in both goods and services. In FTA import duties are reduced or eliminated by both sides and thereby allowing natural movement of goods and services and labour force. Since both the public and private sectors in India lack confidence in competition in prices and quality with developed countries, India has not entered into meaningful FTAs. Except Japan India has entered into an agreement of FTAs only with developing countries like Singapore, South Korea, Asean, Malaysia and now UAE.
However now India has shown confidence by signing the economic cooperation and trade agreement with Australia on April 2 establishing a free trade agreement in both goods and services between the two nations. From the viewpoint of India this is a landmark development. In 2021 Australia exported goods worth $13.6 billion to India and imported goods worth $ 6.4 billion. In addition to this the two countries traded $ 7 billion in services with each other. FTA provides immediate tariff cuts and their eventual elimination on the vast majority of imports by each country. Arvind Panagariya tells that once fully implemented 96% of India’s exports to Australia and 85% of Australia’s exports to India will be duty free. This FTA will provide a level playing field to India vis-vis its competitors in labour intensive products such as apparels and light manufacturing.
The FTA with Japan and now with Australia will give some confidence to Indian policymakers. As a next step we should think and sign FTA agreements with our bigger trading partners UK and EU. If India can achieve it successfully then probably we can gather courage for more ambitious FTA agreement with our largest trading partner, US. These FTAs will eliminate the dependence of India on China giving it a strategic advantage. India has to march steadily on way to its economic growth while grappling with issues like inflation and unemployment. Constant course corrections, like the present increase in Repo rate by RBI to check inflation, will have to be taken. Let India be an economically confident country.
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एन. के. त्रिपाठी
एन के त्रिपाठी आई पी एस सेवा के मप्र काडर के सेवानिवृत्त अधिकारी हैं। उन्होंने प्रदेश मे फ़ील्ड और मुख्यालय दोनों स्थानों मे महत्वपूर्ण पदों पर सफलतापूर्वक कार्य किया। प्रदेश मे उनकी अन्तिम पदस्थापना परिवहन आयुक्त के रूप मे थी और उसके पश्चात वे प्रतिनियुक्ति पर केंद्र मे गये। वहाँ पर वे स्पेशल डीजी, सी आर पी एफ और डीजीपी, एन सी आर बी के पद पर रहे।
वर्तमान मे वे मालवांचल विश्वविद्यालय, इंदौर के कुलपति हैं। वे अभी अनेक गतिविधियों से जुड़े हुए है जिनमें खेल, साहित्यएवं एन जी ओ आदि है। पठन पाठन और देशा टन में उनकी विशेष रुचि है।
