18 NOV,2019 | MEDC
India’s withdrawal from the RCEP has rekindled the debate of how far protectionism serves large economies attempting to integrate with the emerging international trading system. Withdrawal from the RCEP is not as important as the fact that increasing protectionism is eroding our global economic competitiveness. Concerns about India’s rising trade deficit with RCEP members, particularly China, led to our country’s withdrawal from the proposed pact. These concerns have also led to calls from various quarters to stem the flow of imports from these countries, especially China. However, this is an option that we cannot choose for long, as it could end up becoming not just unproductive but counterproductive to our economy. India’s tilt towards protectionism has meant that the country’s integration in global value chains (GVCs) has suffered in recent years. A recent World Bank report showed that between 2007 and 2017, GVC participation rates for most developing countries has declined. However, for India the decline has been sharper than that for others and that does not auger well in an increasingly globalized economy. India needs to put its manufacturing sector in order if it is to benefit from the current global trade wars. It should also gradually open up its economy and adopt fair and predictable trade rules. Sooner or later, Indian industry will have to learn to stand on its own feet. To this end, domestic firms across industries should face a carrot and stick approach to enable them to enhance their global competitiveness.
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