Q 2. भारतीय अर्थव्यवस्था के समक्ष वे कौन-सी चुनौतियाँ हैं जब विश्व स्वतंत्र व्यापार तथा बहुपक्षीयता से दूर होकर संरक्षणवाद तथा द्विपक्षीयता की ओर बढ़ रहा है। इन चुनौतियों का सामना किस तरह किया जा सकता है?
(UPSC 2025,10 Marks,150 Words)
Theme:
India's Economic Challenges Amid Global Protectionism
Where in Syllabus:
(Indian Economy and Global Trade Dynamics)
What are the challenges before the Indian economy when the world is moving away from free trade and multilateralism to protectionism and bilateralism? How can these challenges be met?
Q 2. भारतीय अर्थव्यवस्था के समक्ष वे कौन-सी चुनौतियाँ हैं जब विश्व स्वतंत्र व्यापार तथा बहुपक्षीयता से दूर होकर संरक्षणवाद तथा द्विपक्षीयता की ओर बढ़ रहा है। इन चुनौतियों का सामना किस तरह किया जा सकता है?
(UPSC 2025,10 Marks,150 Words)
Theme:
India's Economic Challenges Amid Global Protectionism
Where in Syllabus:
(Indian Economy and Global Trade Dynamics)
What are the challenges before the Indian economy when the world is moving away from free trade and multilateralism to protectionism and bilateralism? How can these challenges be met?
प्रस्तावना
As the global economy shifts from free trade and multilateralism to protectionism and bilateralism, the Indian economy faces significant challenges. According to economist Arvind Subramanian, this trend could hinder India's export growth and economic integration. With global trade growth slowing to 1.2% in 2019 (WTO), India must enhance domestic competitiveness and diversify trade partnerships to mitigate these impacts. Emphasizing innovation, infrastructure, and policy reforms can help India navigate this evolving landscape.
India's Economic Challenges Amid Global Protectionism
Challenges Before the Indian Economy:
● Trade Barriers and Tariffs:
○ With the global shift towards protectionism, countries are imposing higher tariffs and non-tariff barriers. This can affect India's export competitiveness, especially in sectors like textiles and agriculture.
○ Example: The US-China trade war led to increased tariffs, impacting global supply chains and Indian exports.
● Reduced Market Access:
● Bilateralism may limit India's access to certain markets as countries prefer bilateral agreements over multilateral ones, potentially excluding India from key trade deals.
○ Example: The Regional Comprehensive Economic Partnership (RCEP) was seen as a significant trade bloc that India opted out of, which could limit its market access in Asia.
● Supply Chain Disruptions:
○ The move away from multilateralism can disrupt global supply chains, affecting industries reliant on international components and raw materials.
○ Example: The semiconductor shortage during the COVID-19 pandemic highlighted vulnerabilities in global supply chains.
● Foreign Investment Challenges:
○ Protectionist policies can deter foreign direct investment (FDI) as investors seek stable and open markets. This can impact sectors like manufacturing and technology in India.
○ Example: Changes in FDI policies in sectors like e-commerce have affected companies like Amazon and Walmart in India.
● Technological and Innovation Gaps:
○ Protectionism can limit access to advanced technologies and innovations, affecting India's growth in sectors like IT and pharmaceuticals.
○ Example: Restrictions on technology transfer can hinder India's progress in emerging technologies like 5G and AI.
Strategies to Meet These Challenges:
● Diversification of Export Markets:
○ India should focus on diversifying its export destinations to reduce dependency on a few markets and mitigate risks from protectionist policies.
○ Example: Strengthening trade ties with African and Latin American countries.
● Enhancing Domestic Competitiveness:
○ Improving domestic infrastructure, reducing logistics costs, and enhancing ease of doing business can make Indian products more competitive globally.
○ Example: Initiatives like "Make in India" aim to boost manufacturing and exports.
● Strengthening Regional Trade Agreements:
○ Engaging in regional trade agreements can provide India with preferential access to key markets and strengthen its position in global trade.
○ Example: The India-Mauritius Comprehensive Economic Cooperation and Partnership Agreement (CECPA) is a step towards enhancing trade ties.
● Boosting Innovation and Technology:
○ Investing in research and development (R&D) and fostering innovation can help India bridge technological gaps and become a leader in emerging sectors.
○ Example: The Atal Innovation Mission (AIM) promotes innovation and entrepreneurship across the country.
● Policy Reforms and Economic Diplomacy:
○ Implementing policy reforms to attract FDI and engaging in economic diplomacy can help India navigate the challenges of protectionism.
○ Example: The Production Linked Incentive (PLI) scheme aims to boost domestic manufacturing and attract foreign investment.
● Trade Barriers and Tariffs:
○ With the global shift towards protectionism, countries are imposing higher tariffs and non-tariff barriers. This can affect India's export competitiveness, especially in sectors like textiles and agriculture.
○ Example: The US-China trade war led to increased tariffs, impacting global supply chains and Indian exports.
● Reduced Market Access:
● Bilateralism may limit India's access to certain markets as countries prefer bilateral agreements over multilateral ones, potentially excluding India from key trade deals.
○ Example: The Regional Comprehensive Economic Partnership (RCEP) was seen as a significant trade bloc that India opted out of, which could limit its market access in Asia.
● Supply Chain Disruptions:
○ The move away from multilateralism can disrupt global supply chains, affecting industries reliant on international components and raw materials.
○ Example: The semiconductor shortage during the COVID-19 pandemic highlighted vulnerabilities in global supply chains.
● Foreign Investment Challenges:
○ Protectionist policies can deter foreign direct investment (FDI) as investors seek stable and open markets. This can impact sectors like manufacturing and technology in India.
○ Example: Changes in FDI policies in sectors like e-commerce have affected companies like Amazon and Walmart in India.
● Technological and Innovation Gaps:
○ Protectionism can limit access to advanced technologies and innovations, affecting India's growth in sectors like IT and pharmaceuticals.
○ Example: Restrictions on technology transfer can hinder India's progress in emerging technologies like 5G and AI.
Strategies to Meet These Challenges:
● Diversification of Export Markets:
○ India should focus on diversifying its export destinations to reduce dependency on a few markets and mitigate risks from protectionist policies.
○ Example: Strengthening trade ties with African and Latin American countries.
● Enhancing Domestic Competitiveness:
○ Improving domestic infrastructure, reducing logistics costs, and enhancing ease of doing business can make Indian products more competitive globally.
○ Example: Initiatives like "Make in India" aim to boost manufacturing and exports.
● Strengthening Regional Trade Agreements:
○ Engaging in regional trade agreements can provide India with preferential access to key markets and strengthen its position in global trade.
○ Example: The India-Mauritius Comprehensive Economic Cooperation and Partnership Agreement (CECPA) is a step towards enhancing trade ties.
● Boosting Innovation and Technology:
○ Investing in research and development (R&D) and fostering innovation can help India bridge technological gaps and become a leader in emerging sectors.
○ Example: The Atal Innovation Mission (AIM) promotes innovation and entrepreneurship across the country.
● Policy Reforms and Economic Diplomacy:
○ Implementing policy reforms to attract FDI and engaging in economic diplomacy can help India navigate the challenges of protectionism.
○ Example: The Production Linked Incentive (PLI) scheme aims to boost domestic manufacturing and attract foreign investment.
निष्कर्ष
The shift from free trade to protectionism poses challenges for India's economy, including reduced export opportunities and increased trade barriers. To counter these, India must enhance domestic manufacturing, diversify export markets, and strengthen regional trade agreements. As Raghuram Rajan suggests, focusing on innovation and skill development can boost competitiveness. Embracing digital trade and sustainable practices will also be crucial. By fostering a resilient economic framework, India can navigate the evolving global trade landscape effectively.