Trade Transformation: India’s Ascent Up the Global Value Chain

India’s journey to boost trade and ascend the global value chain through strategic partnerships, innovation, and policy reforms

Trade is the lifeblood of a nation’s development, a fact underscored by the economic success stories of countries like Japan, South Korea, and China. Historically, India has leaned towards protectionism in its economic policies, but winds of change are blowing, and the country is now actively embracing trade and strategic partnerships to unlock the full potential of globalization. With a determined goal of achieving USD 2 trillion in exports by 2030, India stands on the brink of a transformative journey.

Over the past decade, India’s merchandise and services exports have shown steady growth, but to reach the audacious USD 2 trillion target, both sectors must sustain substantial growth rates. India’s current share in global merchandise exports is relatively small at 1.8%, emphasizing the need to enhance its global competitiveness.

India’s logistics costs, accounting for 14-18% of GDP, far exceed the global benchmark of 8%. While the government’s investments in transport infrastructure and logistics policies are steps in the right direction, more substantial efforts are needed to bridge this gap.

To ascend the global value chain, India must focus on high-tech manufacturing exports and invest in Research and Development (R&D) and innovation to incentivize the private sector in these areas. Additionally, lowering import duties can facilitate export growth by granting access to cheaper raw materials and enhancing competitiveness.

Scaling up production is essential, as India’s exports heavily rely on Micro, Small, and Medium Enterprises (MSMEs). While supporting MSMEs is vital, India must also increase production scale to benefit from economies of scale. Policies like the Production Linked Incentive (PLI) scheme are steps in the right direction.

In the services sector, India has performed well, with a 4% share in global services exports. Diversifying services exports into sectors like tourism and medical services should be a strategic priority.

The nature of new trade agreements will significantly impact India’s trade-led growth. Comprehensive agreements that encompass merchandise, services, technology transfer, and investment opportunities are vital. Care should be taken regarding new-age agreements that address environmental and sustainability issues.

As the global economy shows eagerness to engage with India, a renewed focus on trade and strategic partnerships is imperative. Trade can undoubtedly be the next growth driver for the Indian economy, provided we are fully prepared to seize this opportunity.