At a time when India’s exports face adverse global headwinds, the commerce and industry ministry wants to boost shipments with a new trade-cum-investment promotion strategy. The ministry has identified 12 countries—the US, Brazil, Canada, UAE, Saudi Arabia, the UK, Germany, Sweden, Japan, Taiwan, South Korea and Russia—for pushing closer commercial ties through roadshows and marketing events. As these 12 focus countries are also a big source of foreign direct investments, channels of communications would reportedly be opened with some of the biggest companies there to encourage them to deepen their engagement with India. Couple of years ago, there was a similar focused drive to fix targets for each of the top 30 markets instead of only setting a full-year-goal.
The commerce ministry followed it up with regular meetings with stakeholders and overseas missions for interventions to enable exporters to step up shipments to these identified markets. An identical template is being followed this time together with investment promotion. For perspective, these 12 countries accounted for 38-39% of India’s exports, two-way trade and overall trade imbalance in FY 23. As for FDI, these countries accounted for 28% of foreign equity inflows into the country from April 2000 to March 2023 and 30.8% of India’s outbound FDI outflows over this similar period, according to the department for promotion of industry and internal trade and department of economic affairs in the finance ministry.
While this country-specific drive will doubtless yield some gains, what will bolster these efforts manifold are free trade agreements, including deep ones with the powerful regional blocs like North America, the European Union, and the Indo-Pacific region. Of the 12 countries, India already has comprehensive economic partnership agreements with Japan, South Korea and the UAE. It is currently negotiating FTAs with the UK, Canada and the Gulf Cooperation Council. FTAs are a force multiplier for trade and investments.
For instance, there has already been a significant uptick in bilateral trade and investments since India’s CEPA with UAE came into force on May 1, 2022. This aims to step up bilateral trade to $115 billion within five years, up from $84.5 billion in FY 23. The UAE has invested $3.3 billion in India while India’s outbound investments amounted to $1.2 billion in FY 23. A similar prospect is in store to raise Indo-UK bilateral trade to $100 billion by 2030 from current levels of $20.4 billion, with more two-way investments once the FTA is inked. Commerce and industries minister Piyush Goyal is hopeful of concluding the agreement within the next few months.
However, the most efficacious strategy to step up India’s trade and FDI inflows—not just with the chosen 12 but with all countries—is a more open trade and facilitative business environment. Most countries that have gone from being developing to becoming developed nations, have done so on the basis of a manufacturing-led exports revolution. But India’s tariffs are higher than most of its trading partners and need to be lowered—a point underscored by the US ambassador to India when he mentioned that India continues to have the highest general barriers of any large economy in the world. Fewer barriers will improve India’s prospects. In a similar vein, former Japanese premier Yoshihide Suga recently said that he would pitch for the improvement of the business environment while encouraging the private sector to invest more in India.