A Trilogy on India’s Contemporary International Trade Policy:

Part Three – Promise versus Reality

Raj Bhala

 

ABSTRACT: India now is the most populous nation on earth, but its modern international trade policy remains an under-researched area. In contrast, the literature on the trade policy of the second largest nation, China, is voluminous. It is widely appreciated that China, since acceding to the World Trade Organization (WTO) on 11 December 2001, seeks – one way or the other – an ever-more powerful role in shaping the rules of the world trading system. That aspiration remains the lodestar of Chinese trade policy.

 

As for India, it is understood that from the August 1947 British Partition to the ballyhooed 1991 First Generation Reforms, India’s trade policy was that of import substitution. Following the semi-Socialist path chalked out by its founding Prime Minister, Jawaharlal Nehru, India kept tariff and non-tariff barriers high, mandated licenses for importation, and mollycoddled domestic champions favoured by the government in the hopes of transforming its traditional agriculture into modern industry. All the while, as a founding contracting party to the General Agreement on Tariffs and Trade (GATT), and founding Member of the WTO, India put its faith in multilateralism.

 

After 1991, import substitution seemed no longer to be the Indian lodestar. By the early 2000s, protectionism seemed back in vogue. But India also explored free trade agreements (FTAs). That, too, was irregular: India opted for a few bilateral FTAs, but stayed out of mega-deals like the Regional Comprehensive Economic Partnership (RCEP) and Trans-Pacific Partnership (TPP). With Prime Minister (PM) Narendra Modi came expectations of liberalization, but also Hindutva. Redolent of America First advocated by former U.S. President Donald J. Trump, for this Hindu nationalist sentiment, words like ‘globalization’ and ‘cosmopolitan’ are pejorative, and hopes for enhancing peace through cross-border commercial interdependence undermines national security.