The pandemic has uncovered grave vulnerabilities in production networks of essential commodities. There is consensus that nations have to focus on foreign trade policy with the specific mandate of addressing vulnerabilities, managing disruptions, and reducing concentration. India has a unique chance to leverage these developments to attract global value chains, especially by exploring partnerships with strategically and geopolitically aligned nations such as the US and the Quad. This will require India to streamline its regulations and design a policy environment that attracts and supports multinationals wishing to establish India as a base, for serving India’s market and the Asian and global market at large.
On January 21, 2022, the Observer Research Foundation, in collaboration with the Confederation of Indian Industry and ORF America hosted a closed-door virtual roundtable on India’s Foreign Trade Policy: imperatives for Indian Industry. The session brought together representatives from Indian industry to get a first hand account of barriers to India’s GVC aspirations. The purpose of the session was to explore the imperatives for global integration for the Indian industry and seek inputs on specific measures the Indian industry needs to take for better global integration.
The roundtable shed light on the regulatory changes necessary to aid India’s integration into GVCs. The most pressing issues industry highlighted included firstly the need for revising the rates of the Remission of Duties and Taxes on Exported Products (RoDTEP) to rates similar to the old Merchandise Exports from India Scheme (MEIS). This was a common concern between both domestic industry as well as foreign companies manufacturing and exporting out of India. Secondly, a need was felt to revisit India’s Free Trade Agreements (FTA’s) to fix the inverted duty structures that put Indian manufacturers and exporters at a disadvantage. A third recurring concern was the need for Mutual Recognition Agreements (MRA’s) for Indian quality certifications and licenses which are equivalent to foreign markets or vice versa to decrease red tape. Fourthly, a need was expressed for stability in tariff rules to make them more predictable. It was noted that to help foreign companies relocate manufacturing to India, an ecosystem needs to be created in a phased manner through sustained government policy – through for example incentive schemes such as the PLIs. India needs to lay out a plan that will allow investment to bring in GVCs. This will help drive manufacturing in India.
The session was conducted as part of an ongoing project undertaken by ORF on India's GVC integration. In the coming months, there will be continued interaction with other stakeholders including academics and policy makers to map the policy choices available to India to better its GVC participation. ORF’s research will culminate in a report later in 2022.