Future of International Trade in India

With countries like the USA, Europe, and China struggling with a host of issues, this is an excellent opportunity for India to lead foreign trade. Check out this post to know what the future might hold for cross-country trade in India. 

India is currently the 6th largest economy all over the world, with a GDP of $2.597 trillion. As per a report by the World Bank, the economy in India is expected to grow at a rate of 7.3% in 2018-19 and at 7.5% in the next two years. This also makes India the fastest growing economy in the world as compared to other emerging economies.  

Moreover, with the USA struggling with its leadership, Europe busy with Brexit, and China involved in a trade war with the USA, this is an excellent time for India to lead foreign trade. Even the government is aiming for expansive cross-country trade policies to increase India’s share in world exports to 3.5% from around 2% in the next few years. 

While the signs are positive indeed, what will be the future of foreign trade in India? Some noteworthy points are discussed below-

  1. Ease of doing business

In a recent report by World Bank, India stands at the 77th position in the ‘Ease of Doing Business’ list of 2018. A year ago, India was at the 100th spot. The impact of government initiatives can also be witnessed with the likes of Walmart now making significant investments in India. 

In 2014, the Indian government increased the upper limit for foreign investment to 49% from 26% in sectors like insurance. Thanks to such initiatives, the FDI (Foreign Direct Investment) in India grew from $45.15 billion in 2015 to $60.97 billion in 2018. Moreover, the government is already working to increase FDI to up to $100 billion in the next two years. 

  1. Geography and product-specific exports

The commerce and industry department of the government is currently focused on increasing exports with the help of geography and product-specific exports to help India increase its foreign trade market share. Under this matrix, India has already started exporting a host of products to Latin America, the Middle East, and Africa.

Efforts are also being made to eliminate the trade intermediaries. For instance, India is now closely working with Russia for importing rough diamonds. This move will help increase bilateral trade and help the diamond industry in India. Moreover, with the intermediaries eliminated, it will be cheaper for Indian diamond businesses to purchase raw materials from Russia. 

  1. Boost in the services sector

India’s service sector share in global services exports stood at 3.3% in 2015. The government has now set a new target of increasing it to 4.5% by 2022. With regards to the gross value added, the services industry share was around 52% in 2015-16. The same in 2022 is expected to reach 60%. 

As the services export sector has huge growth potential, the government has also set aside Rs. 5,000 for it to achieve the targets. Moreover, the commerce and industry department has also identified 12 different sectors like IT, hospitality and tourism, transport and logistics, finance, and more where significant efforts would be made for boosting the export of services.

  1. Resolving foreign trade issues

Now that the NDA government is in power again, one of its most important tasks is to make decisions with regards to the issues related to international trade policies. Some of the most important of them are working with the US to work out a solid trade agreement that can prevent bilateral trade issues and creating sustainable industrial and export policies. 

It is also time for India to take a stand on the trade pact with China and focus on oil imports from Iran amid the growing US-Iran tension. 

Time to Focus on improved business framework 

While the government is abundantly focused upon making India a leading country in foreign trade, it is also the duty of the businesses involved in import/export to start improving their business operations to better match with the working of the government. To boost the operations, an increasing number of businesses now rely upon international trade advisory services. 

Be it customs, compliance, foreign trade policy, or free trade agreements; professional advisory firms can help improve the prospects of foreign trade for businesses and help them grow their business in a legal, affordable, a time-efficient manner.