India has consistently demonstrated assertiveness in its trade dealings at World Trade Organisation meetings, often engaging in disputes with various trading partners. However, the recent altercation with Thailand marks an unusual departure from the historical camaraderie between the two nations. In a surprising turn of events, India, once an ally of Thailand at the WTO, notably backed Supachai Panitchpakdi, Thailand’s trade negotiator-turned-trade minister, for the position of WTO director-general in 2002.
The recent dispute with Thailand at the WTO ministerial conference in Abu Dhabi, sparked by Thailand’s claim of India subsidising rice exports, aligns with the Narendra Modi government’s habitual defensive stance in foreign trade matters. This altercation, though not unprecedented, underscores the consistent protective approach taken by the Indian government under Modi’s leadership.
Amidst the hype surrounding India’s assertion as the world’s fastest-growing economy, a claim open to scrutiny, the reality remains that the country’s performance in international trade has been suboptimal. During Prime Minister Manmohan Singh’s leadership, foreign trade served as a catalyst for growth, contributing to an impressive eight percent average national income growth from 2003 to 2012. However, since 2014, India has encountered challenges in both policy and performance related to foreign trade, prompting concerns about the global competitiveness of its industries.
Experiencing a decline from two per cent in 1950 to 0.5 per cent in 1990, India’s share in global merchandise exports witnessed a substantial upswing in the period between 1991 and 2011. By 2010, it surpassed the two per cent mark, primarily attributed to the trade and industrial policy reforms initiated in 1991. In addition to this surge in merchandise goods trade, India demonstrated commendable performance in service exports, reaching a four per cent share in global services exports. From 2004 to 2014, the contribution of foreign trade to national income reached a peak of 56 per cent in 2012. However, since 2014, this share has consistently remained below the 50 per cent mark.
The diminishing contribution of foreign trade to national income parallels the decline in India’s global export share. In essence, the track record of the Narendra Modi government in the arena of foreign trade, encompassing both policy formulation and actual performance, has been disheartening. This becomes particularly evident when juxtaposed with the notable accomplishments of the preceding decade.
The Modi government’s stance on foreign trade has been influenced by a combination of the inherently protectionist ideology of the Bharatiya Janata Party and the mounting apprehensions within the Indian industry regarding competition from China. In the period from 1991 to 2001, tariffs experienced a swift reduction; however, a noteworthy shift occurred after 2017 when the government opted to increase them for the first time in two decades. Despite this tariff adjustment, China has successfully expanded its exports to India, underscoring the critical dependencies that Indian industry has struggled to overcome.
In fairness to India’s trade negotiators and ministers, it’s crucial to acknowledge the challenging playing field they’ve consistently navigated. India has adopted a defensive stance, perpetually focused on safeguarding its interests rather than actively pursuing market expansion. As a result, Indian negotiators have consistently found themselves in a position of reacting to proposals from other nations rather than putting forth their own. Nonetheless, there was an opportunity for India to adopt a more strategic approach during the recent ministerial meeting in Abu Dhabi.
A perplexing aspect of Prime Minister Modi’s portfolio allocation decisions is the omission of Hardeep Singh Puri for the commerce portfolio. Mr. Puri, well-versed in trade policy and WTO intricacies as a former trade diplomat, seems to have missed an opportunity. His potential could have outshone the comparatively lackluster performances of Nirmala Sitharaman, Suresh Prabhu, and Piyush Goyal at Udyog Bhavan.
Despite Mr. Prabhu’s genuine efforts, he fell short of the assertiveness needed to resonate with Western trade policy negotiators. Ms. Sitharaman and Mr. Goyal, on the other hand, found themselves grappling with a lack of expertise, masking their technical shortcomings with an air of arrogance and bravado. Unfortunately, none of them managed to make a significant impact in multilateral, bilateral, or plurilateral trade policy negotiations.
The inadequacy of individual ministers and their compliant officials represents only a fraction of the dismal narrative surrounding trade policy and performance throughout the Narendra Modi era. The more significant challenge lies in the failure to forge agreements with major global markets. Despite the camaraderie shared with then-US President Donald Trump, Prime Minister Modi was unable to persuade Mr. Trump to reconsider the termination of India’s access to the US market under the Generalised System of Preferences (GSP).
Dealing with the United States has proven to be a persistent challenge, marked by continual grievances regarding India’s trade policy and the trade deficit between the two nations. In a telling scenario at the recent WTO ministerial conference, Commerce Minister Piyush Goyal found himself in a solitary position on crucial trade facilitation matters, with only his South African counterpart by his side.
India faced scrutiny from a diverse array of global entities, including the United States, the European Union, China, and the Asean bloc. Despite ongoing negotiations for a free trade agreement with the European Union and post-Brexit Britain, India has struggled to reach a satisfactory conclusion. The challenges extend beyond Western developed economies, as engagements with the exporting powers of Asia have proven to be equally challenging.
Opting out of the Regional Comprehensive Economic Partnership (RCEP), India cited the primary reason as the trade threat posed by China. However, despite this stance, trade interactions between India and China persist with considerable vitality. Conversely, the choice to withdraw from the RCEP has adversely impacted trade prospects with fellow RCEP members, including Japan and the economies of the Asean region.
Within the global economy, three major markets stand out— the United States, the European Union, and East Asia. Regrettably, India has struggled to establish a substantial presence in any of these pivotal markets. Prime Minister Modi can lay claim to some progress in the Gulf region, particularly with the amicable relations cultivated with neighboring Dubai.
Following this year’s general election, the forthcoming government must allocate closer attention to trade policy, inherently intertwined with industrial and foreign investment policies. The synergy of these three facets is pivotal. Both the “Make in India” initiative and trade policy have fallen short in delivering remarkable outcomes over the past decade. Achieving and sustaining the position of the world’s third-largest economy necessitates comprehensive reforms in industrial and trade policies. The complacency of the past decade does not align with the ambitious goals set by Prime Minister Narendra Modi.
(The writer can be reached at dipaknewslive@gmail.com)
