India needs to be much more open, integrate with the global economy and have confidence in its own producers, said Montek Singh Ahluwalia, former Deputy Chairman of the Planning Commission of India.
He was delivering a keynote address at a webinar organised by CUTS International to discuss the Indo-Pacific Economic Framework for Prosperity (IPEF) and its implications and potential for India.
The meet was moderated by Pradeep Mehta, Secretary General, CUTS.
Mehta stated that most debates on the IPEF so far tended to focus on its form, rather than its possible content. He recognised that as of now, only the process to establish the IPEF had been launched, while the actual framework would be shaped over the coming months as negotiations under its four pillars progressed.
Ahluwalia mentioned that the ease of movement across borders and the minimisation of procedural hassles are critical for enhancing trade, which are facilitated by being a part of a trading arrangement. He lamented India’s inability thus far to tie all these points together and come up with a coherent approach to trade, logistics and industrial policy. He also stated that it was high time India stepped up to compete with China in GVCs.
Further, given that future trade agreements will involve deeper integration on behind-the-border measures instead of tariffs, India should be ready to accept such commitments. He pointed out that entering into binding trade commitments often compels the system to adjust, which can be a driver for domestic reforms. On IPEF, Ahluwalia suggested that India should put its weight behind turning the IPEF trade pillar into a trade agreement, covering market access provisions. Overall, he cautioned that the idea that India could stay out of trade agreements, while the rest of the world went ahead with them, would be “self-destructive”.
Gopal Krishna Agarwal, National Spokesperson for Economic Affairs, BJP reaffirmed the government’s commitment to integrating in GVCs, and that it was keen on signing FTAs with important trading partners like the US. However, he emphasised the need to carefully assess what was on the table for India in such deals. While the need for greater economic integration was clear, when and how to pursue this remained important questions. Agarwal also focused on the need for more coherence between trade, industrial and logistics policies, recognising the need for moving forward with long-pending domestic economic reforms and corresponding political economy concerns.
Badri Narayanan Gopalakrishnan, Lead (Advisor), Trade andCommerce, NITI Aayog, spoke on how India’s trade strategy aligns with the IPEF. Observing that India had gained a lot from trade liberalisation overall, he stated that India had always been a strong advocate of a transparent, rules-based trading system. He said that while IPEF was not a trade agreement, its trade component was still important. India has the advantage of having pre-existing trade agreements with many IPEF members already in place.
India, while committed to the multilateral trading system, has also been seeing FTAs with renewed interest. Gopalakrishnannoted the importance of finalising trade agreements on a timely basis, as opposed to negotiating forever and not making much headway. Importantly, he highlighted India’s change in trade strategy where it was now entering into FTAs with countries with which it shared a complementary trade relationship.
Pritam Banerjee, Consultant, Asian Development Bank, opined that the existing multilateral trading system was inadequate to deal with the new normal in trade, and the IPEF could be a step in the right direction. He stated that it was time for India to present a more confident face and drive the narrative as a mature economy. The IPEF offered a chance for India to engage with issues such as digital trade more proactively, instead of adopting a passive, defensive stance.Banerjee observed the need for a whole-of-government approach to domestic reforms, which needed to take place parallelly with India’s international posturing on trade-related issues.
Deepak Mishra, Director and Chief Executive, ICRIER,opined that India had been an unwilling globaliser all along, and that it was now refreshing to see the government’s current ambition of vigorously engaging on FTAs. Mishra lamented that trade policy and domestic reform, as well as industrial policy, had often been misaligned and not pulling India in the same direction. For trade to work, trade reforms need to be accompanied by simultaneous domestic reforms. He observed that a strategy of first securing a large share in GVCs, before demanding more local value addition, would be a prudent strategy for India to follow.
V. Ranganathan, former RBI Chair Professor, IIM Bangalore, focused on the renewable energy pillar of the IPEF in his remarks. He noted that IPEF could push India on a clean energy path and bankrupt the already ailing power distribution companies.
Amita Batra, Professor of Economics, Jawaharlal NehruUniversity stated that IPEF is being pushed forward only as an arrangement, not as an agreement. The IPEF is essentially the economic leg of a strategic structure which has evolved in the context of global geopolitics.
Batra suggested that India should not shy away if the United States does bring in issues of tariff and market access provisions within the IPEF at a later date. In fact, she stated that India should push forward for the IPEF and strengthen its trade pillar.
Batra advised the government to prepare in advance to negotiate tariff cuts onimportant export interests in apparel, and gems and jewellery, which still faced high tariff barriers in markets like the US.
“The risks posed by supply chain shocks have never been more visible, following the compounding crises of the US-China trade war, the COVID-19 pandemic, and the Russia-Ukraine conflict. GVCs, once viewed as the silver bullet for economic development, are coming under increasing scrutiny,” the think tank said in a release.
As per a government official who attended the meeting, the minister asked industry to become competitive and not depend on subsidies.