Global supply networks cause Amanirbharta to become less important

The world views India’s signing of free trade agreements with the four nations that comprise the European Free Trade Association (EFTA)—Norway, Switzerland, Iceland, and Liechtenstein—as a first step toward further commercial opening. These four countries, which are not part of the European Union (EU), have agreed to spend $100 billion in India over the next fifteen years as a kind of exchange.

Important talks are ongoing with the EU, Israel, and other economically significant nations. India has already inked an interim agreement with Australia. A contract with Oman is prepared for signature. It is believed that the government is trying to take advantage of the increased attention that the world is paying to what is now the main economy that is expanding the quickest. Additionally, there is a belief that, given its historical trading ties to the UK, India would soften its stance in these talks. The incoming administration can push the agreement one more time to ensure its completion.

The current administration, which started out aiming to build the nation atmanirbhar, or self-reliant, has taken a step back with its growing interest in international commerce. The government’s effort to increase industrial activity via the production-linked incentive (PLI) plan would be ineffective unless import tariffs are reduced, which must coincide with a broader embrace of trade. For instance, hefty import duties on smartphone parts are impeding local production, which is essential to the PLI program.

Prioritizing this will help the government reap the benefits of the “China plus one” strategy that multinational corporations are using to lessen their heavy reliance on Chinese manufacturing. At the moment, Vietnam and, to a lesser degree, Malaysia are often outperforming India as international companies discover that these regions provide reduced prices and score well on the ease of doing business.

Furthermore, India cannot hope to become a major center for global supply chains until it can be considered a global manufacturing powerhouse. Not a single nation produces every component used in today’s intricate engineering and electronics goods. To ensure that the finished goods that cross the borders are competitive on a global scale, raw materials and components that make up assemblies and sub-assemblies must enter and exit the nation via minimum tariff barriers.

It is no longer possible to be self-sufficient in the sense of cultivating and making the majority of your own consumption and yet hope to become the world’s leading manufacturer. For instance, India leads the world in producing medications without patents, but it also imports a significant amount of the active components used to make pharmaceutical formulations from China. The economy, revenue, and wellbeing of the nation will all benefit from the nation letting go of its antiquated, simple ideas of becoming atmanirbhar as soon as possible.

The liberalization measures that eliminated license requirements and reduced import tariffs were the cause of the nation’s explosive economic development in the 1990s. Hopefully, the most recent developments in government thought will further this liberalization.

The trade and investment agreement with the EFTA contains more than just tariffs. It also suggests that India is open to adopting the new standards that Western nations are attempting to implement in relation to gender, labor, sustainability, and the environment. To start with the last component, India has to become a country where women are free to pursue their dreams of being as successful as their skills would allow them to be, without feeling bound by a glass ceiling.

India will also need to live up to the pledges it made to decrease emissions and take part in the fight against global warming. Ceasing the construction of coal-fired power facilities is a crucial component of this. India is a significant importer of crude oil in addition to being a major coal miner. A vigorous program aimed at harnessing wind and solar energy and producing green hydrogen must be implemented. It is the proper course of action to increase domestic production of electrolysers, which generate hydrogen.

Moreover, implementing internationally recognized labor standards is a crucial concern. Employees, as well as gig workers and security guards in housing societies, must be allowed to adhere to normal working hours and not work twelve hours a day. They also need to benefit from social security benefits, which are now exclusive to those with employment in the organized sector of the economy.

In the event that new labor laws result in a greater percentage of temporary employees, the issue warrants careful consideration. Employees must be able to take use of health insurance advantages as well. The goal of the PM Jan Arogya Yojana is to provide this to the impoverished, but there is still more work to be done before it can properly function for everyone who needs to be included. Trade partners of India will not be amenable to competitively priced exports from Indian companies that use workers who do not follow labor laws.

Many different industry will benefit from a breakthrough in trade discussions. First and primarily, 45 million people are employed in the textile industry. Aside from maritime items, car and technical components, chemicals, leather, jewels, and jewelry, these industries are also poised to benefit from strong tailwinds.

Based on official forecasts, aggressively attempting to integrate India into international supply chains might result in the creation of 80 million new employment by 2030. If even a small portion of this were to occur, the additional workers’ earnings would stimulate private consumption spending and in turn increase demand for corporate sector FMCG (fast-moving consumer goods) giants, whose volume expansion in rural regions has been slowing down.

Growing consumer spending will cause factories to use their capacity more and will force them to build more capacity. As indicated in the Interim Budget, this will result in increased investment in equipment and machinery, allowing the private sector to assume responsibility for capital investment from the government.