 "Piyush Goyal")
India follows a calibrated approach in trade policy, which is in line with the country’s development journey, even though there is scope for further internationalisation, Union Minister of Commerce & Industry, Consumer Affairs, Food & Public Distribution and Textiles Piyush Goyal said while speaking on the second and concluding day of Business Standard Manthan in New Delhi.
“I do believe that as a (developing) country, which has a long way to go before we are able to ever have a completely free and open economy with (full) capital account convertibility, with almost nil or very low import duties, we have to look at our trajectory and calibrate the trade policy. You can’t have a one-size-fits-all (approach),” Goyal said, adding that there was also a need to internationalise the economy, have a greater degree of engagement with the world, and further Indian exports.
The minister dismissed the argument of some economists that India was a protectionist and high-tariff nation, holding that even developed countries such as the United States (US) had used protectionist measures.
This financial year the minister expects India’s exports to be “flat or a little bit on the positive side”, despite the Israel-Hamas war and the Red Sea-related disruption. On a cumulative basis, during April-February 2023-24, merchandise exports stood at $395 billion, which is 3.5 per cent lower than what was achieved during the same period last year.
“Goods and services together will continue to be positive despite two wars and the Red Sea crisis. We will be doing $2 trillion of exports by 2030,” he said.
FTAs & RCEP
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Speaking about free-trade agreements (FTAs), he said India was in dialogue with the European Union (EU), the United Kingdom (UK), Peru, Chile, and some countries in the Gulf Cooperation Council (GCC).
Goyal said India was renegotiating the “badly done FTAs” with Japan, South Korea, and the 10-member Association of Southeast Asian Nations (Asean).
“Today you find so much criticism and so much negativity in industry and business in India about Japan, (South) Korea and the Asean FTAs. I am almost tempted at times to recommend whether we should reconsider having those FTAs.”
Goyal said if India had not taken the “hard decision” to walk out of the China-backed Regional Comprehensive Economic Partnership in 2019, the country wouldn’t have seen the growth story and investment climate it was witnessing. “Besides, the country would have been flooded with substandard low-quality goods coming in from certain geographies (China),” the minister said.
According to Goyal, the RCEP was one of the “lousiest” and one of the most “threatening decisions” the United Progressive Alliance (UPA) government would have taken.
“We were not part of the RCEP originally. In 2012, the Congress government and its partners decided to jump into the RCEP suo motu. India jumped into the fray, little recognising that we are dealing with a country that doesn’t have transparent economic policies, without assessing how much damage they had already caused because of badly negotiated FTAs with Japan, (South) Korea, and Asean,” he said, adding that no consultations were done with industry, agriculturists, farmers, and micro, small, and medium enterprises (MSMEs).
The RCEP is a pact between Asean nations and five of its FTA partners – New Zealand, Australia, China, Japan, and South Korea. Currently, India has FTAs with 13 out of the 15 RCEP countries.
When asked if India was open to join any trade grouping if China was part of it, the minister said he was open to the idea if the country opened up its economy, made it transparent, and abided by the rules of the World Trade Organization.
Investment
Even as foreign direct investment (FDI) in India declined by 13 per cent to $32 billion during the first nine months of FY24, Goyal said the decline was due mainly to external factors such as uncertainties and challenges in the global economy, including rising interest rates in developed countries.
“For seven years in a row, India saw record FDI inflows, year after year. In the last two years, interest rates in the developed world shot through the roof. From less than half per cent they’re now touching or going to touch 5 per cent in the case of the United States. Now when interest rates in the developed world are at such highs, it’s quite elementary and obvious there’ll be an outward flow of capital and new capital will go a little sluggish. Yet if you see the numbers, they’re not that bad. Some of the numbers in other emerging economies have collapsed,” he said.
On India’s recently signed FTA with the European Free Trade Association (EFTA), Goyal said it would see a first-of-its kind commitment for an investment worth $100 billion over 15 years from all the four European countries -- Iceland, Switzerland, Norway, and Liechtenstein. The investment is also expected to result in at least one million direct jobs.
Even in the case of market access, India will not lose anything. “I (India) don’t lose anything because Switzerland’s costs of production can never hurt your interests. They make very high-quality stuff … we don’t have those in India. Rather, we need them in India. So I lose nothing by giving them market access on goods domestically made in Switzerland or Norway. I’ve not given market access to agriculture. So farmers are not threatened. MSMEs are not threatened because they can’t compete ever in their life,” he said.
Goyal said Switzerland had signed an FTA with a robust chapter on intellectual property rights (IPRs), without India giving up on any of “our rights”, including “our rights” on generic medicines.
“India’s pharma industry was part of the negotiations sitting in the room. The pharma industry has thanked me for this,” he added.
As far as bilateral investment treaties (BITs) were concerned, the minister said while he was not directly involved in the matter, the government was following a “cautious approach” to ensure that India’s interests were protected.
Viksit Bharat
Goyal said the seeds of “our journey to 2047” had been sown in the past 10 years and the government was looking at rapid industrialisation and quick growth in modern 21st century infrastructure to meet the needs of the nation.
“Over the past 10 years, the National Democratic Alliance-led government has brought back India’s credibility in the world. “We have not become the fifth-largest economy, but in Prime Minister Narendra Modi’s third term and I suspect in the next three years, we will be the third-largest economy of the world,” Goyal said, adding that this would happen because of robust macroeconomic parameters, including high forex reserves.
Goyal said India’s decadal Inflation had been the lowest in the country’s history as an independent nation, which is a strong factor to keep the currency stable and in interest rates coming down.
“The government is also looking at newer ideas to boost growth, such as how India’s gold reserves can be recycled,” he added.
The minister said the vision of Viksit Bharat rested on seven or the “Saptarishi” (seven stars named after ancient sages) principles including inclusive development and growth, reaching the last mile or saturation of government programmes and schemes, infrastructure, and growing investment.
“These seven pillars will take a distraught India of 2014 to a developed India of 2024 and beyond. Today, the world is looking up to India. It is for us to grab that opportunity. And I have no doubt in my mind. That today’s Bharat aspires, today’s Bharat inspires, and today’s Bharat achieves big dreams and big goals.”
