'Weak infra, challenging labour laws affecting India's trade'

Expressing concerns over declining "buoyancy" of India's exports, the Economic Survey 2014-15 today said that weak infrastructure, challenging labour laws and scarcity of skilled manpower are affecting the country's trade.
"Trade outcomes have been stagnating. The trading environment is becoming more challenging as the buoyancy of Indian exports has declined with respect to world growth, and as the negotiation of mega regional trading arrangements threatens to exclude India," the Survey said.
It said that a slowdown in the world growth will reduce India's exports, which have already contracted by 11.19 per cent year-on-year in January. On the other hand, the service exports rose 11 per cent to USD 14.3 billion in December 2014.

"India must be especially watchful about services exports which have slowed markedly. These headwinds are, of course, in addition to the domestic factors that are contributing to the slowdown of export growth: weak infrastructure and challenging labour laws in the case of manufacturing, and rising wages and scarcity of skilled labour in the case of services," it added.
In addition to the deteriorating external environment for trade, India has to contend with a rapidly changing policy environment.
As the new government prepares to re-invigorate the Indian economy, it will encounter that the international trade landscape is substantially changing in significant ways, it said adding India needs to find ways to deal with the situation which would arise after the implementation of mega trade deals.

Trade integration within Asia and between Asia and the US will advance significantly if and when the Trans Pacific Partnership (TPP) is negotiated and ratified. Similarly, the markets of North America and Europe will be brought together when the Trans-Atlantic Trade and Investment Partnership (TTIP) are concluded.

China is also part of the Regional Comprehensive Economic Partnership (RCEP) which includes India, ASEAN countries, as well as Japan, Korea, Australia and New Zealand.
"How should India react to this global shift in trade realities? It has two choices: measured integration (the status quo and/or RCEP) or ambitious integration (via the TPP).

"Measured integration would involve a slow but steady pace of domestic reform dictated by India's political constraints and capacity which could only sustain regional agreements of the kind India has negotiated with Asian partners: relatively few obligations, generous exemptions and exceptions and lenient timetables for implementation," the Survey said.
It added that the risk in the status quo scenario is one of India being excluded from large integrated markets with reduced trading possibilities and because of the nature of global value chains in which trade, investment, intellectual property are enmeshed, also reduced investment possibilities.