India’s foreign trade policy (FTP) plays a crucial role in promoting international trade and boosting the country’s economy. The current FTP period is 2015-2020, and it aims to double India’s exports to $900 billion by 2020. However, India has been facing several challenges in achieving this target and attracting foreign investments. Some of the significant challenges include:
- Trade deficit: India has been running a persistent trade deficit, with imports exceeding exports. This situation can be attributed to the country’s reliance on oil imports and the import of electronic goods. The government has been trying to address this issue by encouraging exports and reducing imports through measures like import duty hikes.
- Infrastructure: India’s inadequate infrastructure remains a significant impediment to the growth of exports. Ports, roads, and railways need to be upgraded to reduce transportation costs and improve the efficiency of trade.
- Non-tariff barriers: Non-tariff barriers like technical standards, certification requirements, and regulatory issues are often used by developed countries to restrict imports from developing countries like India. These barriers need to be addressed to promote free and fair trade.
- Access to finance: Small and medium-sized enterprises (SMEs) face difficulties in accessing finance, which constrains their ability to invest and expand. The government has been taking steps to improve access to finance, such as setting up a dedicated fund for SMEs and simplifying the process of availing credit.
In addition to the challenges mentioned above, India has been facing a decline in foreign direct investments (FDIs) and foreign institutional investments (FIIs) in recent years. One of the reasons for this is the global economic slowdown, which has affected investments in emerging markets like India. However, the government has been taking several measures to boost investments, such as relaxing FDI norms in various sectors, simplifying investment procedures, and offering tax incentives to foreign investors.
Recent trends in India’s economy show a positive outlook in terms of attracting investments and promoting exports. India has been ranked as the world’s fifth-largest recipient of FDI, with a total inflow of $64 billion in 2020, despite the COVID-19 pandemic’s disruptions. The country’s export performance has also been improving, with a growth of 60% in April 2021 compared to the same period in the previous year. Additionally, India’s focus on promoting domestic manufacturing through initiatives like the Atmanirbhar Bharat Abhiyan (Self-Reliant India Campaign) is expected to boost exports and reduce imports in the long run.
In conclusion, while India has been facing several challenges in achieving its foreign trade policy targets, the government’s efforts to address them and promote investments and exports are showing positive results. It is essential to continue these efforts and create a favorable environment for businesses to grow and contribute to the country’s economic development.