Chapter 8 of India’s Trade Policy in the 21st Century by Amita Batra provides a critical
assessment of India's trade strategy and outlines key reforms necessary to enhance its global
trade competitiveness. The chapter highlights the challenges and opportunities for India's trade
policy, particularly in the context of shifting global trade dynamics, increasing protectionism,
and the rise of regional trade agreements.
Key Conclusions and Reform Priorities:
1. Global Value Chain (GVC) Integration:
One of the major shortcomings of India's trade policy, as highlighted by Batra, is its limited
integration into global value chains. Unlike countries such as China and Vietnam, which have
successfully embedded themselves in global production networks, India’s participation remains
relatively weak. The reasons include restrictive trade policies, infrastructure bottlenecks, and
regulatory hurdles.
To enhance its GVC integration, India must:
Improve its trade facilitation mechanisms to reduce logistics costs.
Align trade policies with global standards to attract foreign direct investment (FDI).
Focus on export-led growth in manufacturing and high-value services.
Batra suggests that deeper engagement in GVCs would allow India to benefit from technology
transfers, increased employment opportunities, and greater market access for its exports.
2. Tariff Rationalization:
India's relatively high tariffs on various imports have been a major concern for both domestic
and foreign investors. High tariff barriers can:
Increase costs for Indian manufacturers that rely on imported inputs.
Reduce India's attractiveness as a hub for foreign investment.
Limit access to global markets due to retaliatory tariff measures by trade partners.
The book advocates for a more balanced approach to tariff policy, ensuring that while domestic
industries are protected, they are also exposed to global competition to encourage efficiency and
innovation. A gradual reduction in tariffs, along with improvements in domestic production
capabilities, is recommended.
3. Reevaluation of Import Substitution Strategies:
India has recently emphasized self-reliance and import substitution through initiatives like
Atmanirbhar Bharat (Self-Reliant India). However, Batra warns against an overreliance on
protectionist measures such as:
Local content requirements that mandate domestic production.
High import duties that shield domestic firms from competition.
Complex regulatory policies that discourage foreign investment.
While some degree of domestic capacity-building is necessary, excessively restrictive policies
can lead to inefficiencies, reduced foreign technology transfers, and slower economic growth.
Instead, Batra suggests that India should focus on selective import substitution while ensuring it
remains outward-looking and competitive in global markets.
4. Strategic Free Trade Agreements (FTAs):
India’s approach to FTAs has been a subject of debate, particularly after its decision to opt out of
the Regional Comprehensive Economic Partnership (RCEP). Batra argues that India’s past FTAs
have been driven more by geopolitical considerations rather than economic benefits. As a result:
Many FTAs have not significantly boosted Indian exports.
Indian industries often face high non-tariff barriers in partner countries.
FTA negotiations have not always prioritized domestic economic interests.
To make FTAs more effective, India must:
Ensure that trade agreements include "WTO plus" provisions covering e-commerce, intellectual
property rights, and investment protection.
Adopt a more data-driven approach to negotiating trade deals.
Strengthen domestic industries before signing comprehensive agreements.
5. Engagement with Regional Trade Blocs:
Batra emphasizes that India's reluctance to engage in regional trade blocs, such as RCEP, may
limit its access to key global markets. Countries that have joined such agreements benefit from:
Reduced trade barriers among member nations.
Enhanced GVC participation through regional integration.
Greater market access for their exports.
While India has valid concerns about unfair competition from certain economies (such as China),
a complete withdrawal from regional trade frameworks might isolate it from global supply
chains. Instead, Batra recommends that India:
Reevaluate its participation in key trade agreements.
Seek bilateral or sectoral trade arrangements with RCEP members.
Strengthen domestic manufacturing to compete effectively in global markets.
6. Domestic Policy Reforms to Boost Trade Competitiveness:
Beyond external trade policies, India's internal economic environment plays a crucial role in
determining its global trade success. The book highlights key domestic reforms needed to
improve India’s trade performance, including:
Trade Facilitation: Reducing bureaucratic red tape, improving customs procedures, and
streamlining logistics infrastructure to lower transaction costs.
Investment Climate: Strengthening intellectual property rights, contract enforcement, and ease of
doing business to attract FDI.
Regulatory Framework: Simplifying complex labor and taxation laws to make Indian businesses
more competitive.
Overall Conclusion:
Batra's analysis suggests that India's trade policy needs a paradigm shift. Instead of relying on
protectionist measures, India should focus on integrating more deeply into global trade networks,
strategically negotiating FTAs, and implementing domestic reforms to enhance competitiveness.
By aligning its trade policies with global best practices, India can position itself as a major player
in the 21st-century global economy.
