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Introduction:
More than three decades after liberalization, India continues to exhibit protectionist tendencies.
Despite its positioning as a significant player in global geopolitics, India’s reluctance to integrate with global value chains (GVCs) hinders its progress.
The need for the new government to embrace global markets and balance domestic ambitions with international trade integration
Historical Context:
In the 1980s, India pursued aggressive import substitution policies to protect domestic industries, which limited its global competitiveness.
The 1991 economic crisis led to significant trade policy reforms, shifting from import substitution to liberalization.
Despite these reforms, India has remained cautious about embracing deeper trade liberalization due to concerns over trade deficits with countries with which it signed trade agreements.
Current Challenges:
India’s ambition to become self-reliant, as emphasized in the Atmanirbhar Bharat initiative, conflicts with its goal of achieving $1 trillion in exports, which necessitates integration with GVCs.
Rising import tariffs and protectionist policies undermine competitiveness and export promotion efforts.
The withdrawal from the Regional Comprehensive Economic Partnership (RCEP) due to concerns about trade deficits with China exemplifies this struggle.
Economic and Strategic Importance of Global Market Integration:
Embracing global markets can drive economic growth, enhance efficiency and competition in domestic markets, and solidify India’s position as a global player.
An April 2024 RBI bulletin highlighted strong investment demand and positive business and consumer sentiments as key drivers of economic growth.
India aims to position itself as an alternative manufacturing destination to China, competing with economies like Vietnam, Cambodia, and Bangladesh.
Hosting the G20 presidency underscores India's ambition to enhance its influence in international economic policies.
Recent Shifts and Agreements:
India has signed several free trade agreements (FTAs) since 2021, including agreements with Mauritius, UAE, and Australia.
The latest Trade and Economic Partnership Agreement (TEPA) with EFTA countries (Switzerland, Iceland, Norway, Liechtenstein) was signed in March 2024, securing commitments of $100 billion and 1 million direct jobs over the next 15 years.
Balancing Domestic Concerns and Global Integration:
India needs to balance its domestic ambitions with the strategic advantages of global market integration.
Addressing domestic concerns through careful policy design and strategic international engagement is crucial.
By adopting a balanced approach, India can replicate the transformative impact of the 1991 reforms, fostering a more open and robust economy without waiting for a crisis.
Conclusion:
India stands at a crossroads, needing to embrace global markets to drive economic growth, enhance competitiveness, and establish itself as a significant global player.
This requires balancing domestic concerns with strategic international engagement, ensuring a comprehensive approach to trade and economic policies
By embracing global markets, India can achieve its economic and strategic objectives, positioning itself as a key player in the global economy while addressing domestic challenges through thoughtful and balanced policy approaches.
Note: In this UPSC CAPF Essay on India and need of Global Markets, we have given subheadings for your reference. When you write in the UPSC exam, you don't need to do that.
