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In an era marked by shifting economic power, rising protectionism, and the formation of powerful regional trade blocs, India’s export-import (EXIM) policy is at a pivotal crossroads. Global trade dynamics are increasingly influenced by tariff and non-tariff barriers, the growing prominence of regional trading blocs, and an environment of geopolitical polarization. As these trends unfold, India must critically evaluate and adapt its EXIM policy to safeguard and promote its economic interests on the global stage. This blog examines the urgency for restructuring India’s EXIM policy in light of these changes, presenting data, reasons, and a critical perspective on the necessary strategic pivots.

1. Tariff and Non-Tariff Barriers: Repercussions for Indian Exports

Increasing Tariffs and Rising Trade Tensions

The global trade environment has witnessed a rise in tariffs, with major economies frequently deploying these as protectionist measures. India’s own experience with tariff hikes from key trading partners like the United States and the European Union demonstrates the vulnerability of its exports. For instance, recent U.S. tariffs on Indian steel and aluminum and Europe’s new carbon border taxes on high-emission imports illustrate the challenges. In 2023, India’s exports faced around $10 billion in tariff-related constraints in these regions.

Non-Tariff Barriers and Compliance Pressures

Non-tariff barriers (NTBs) have become another significant challenge. Compliance requirements related to health, safety, and environmental standards are especially high for sectors like pharmaceuticals, textiles, and agricultural products, which are key to India’s export basket. For example, Indian pharmaceutical exports to the EU faced rejections worth approximately $500 million in 2022 due to stringent compliance issues. A structured approach toward aligning Indian standards with those of major markets can aid in reducing these rejections.

2. Growing Preference for Regional Trade Blocs

The Shift Toward Regionalism and India’s Position

Regionalism is transforming global trade, with nations gravitating toward closer regional alliances that provide economic and strategic benefits. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP) are prime examples of powerful regional trading blocs. India’s decision not to join the RCEP—a bloc comprising 30% of global GDP—highlights its cautious approach. However, remaining outside such influential regional groupings risks marginalizing India from high-growth markets and advanced trade networks. According to a recent report, non-RCEP members, including India, face an estimated annual trade loss of $60 billion.

The Urgent Need for Regional Alliances

India’s limited involvement in regional alliances reduces its ability to leverage market access for its exports. India’s agreements, such as the one with ASEAN, need to be renegotiated to enhance benefits, while new partnerships should be explored in regions like Africa and Latin America. Increased engagement with regional blocs can provide Indian exporters preferential access, reduce tariff burdens, and encourage trade diversification.

3. Geopolitical Polarization and Strategic Realignments

Navigating U.S.-China Trade Tensions and the ‘China Plus One’ Strategy

Geopolitical shifts, particularly the U.S.-China trade tensions, have influenced companies to diversify production bases—a trend often termed as the ‘China Plus One’ strategy. India has an opportunity to position itself as a manufacturing hub, drawing foreign companies looking for alternatives to China. However, India’s EXIM policy must support this by providing incentives, streamlined processes, and infrastructure enhancements to make the nation a viable and attractive destination for foreign investment.

Aligning with Like-Minded Economies

In the current polarized environment, India’s trade policy should align with economies that share its strategic interests. Strengthening partnerships with nations like Japan, Australia, and those within the Middle East and Africa would enable India to benefit from emerging trade networks focused on security and sustainability. These alliances could also help India navigate global sanctions, ensuring supply chain resilience and bolstering export security.

4. Key Strategic Adjustments Needed in India’s EXIM Policy

To address these challenges, India’s EXIM policy must be restructured, focusing on several key strategic pillars:

A. Dynamic Tariff Policy

India’s tariffs must be revisited to encourage competitiveness and market expansion. Reducing tariffs on imported raw materials critical for sectors like electronics and pharmaceuticals could lower production costs, making exports more competitive.

B. Incentives for High-Value Exports

Incentivizing high-value sectors such as technology, green energy, and electronics can drive India’s export growth. For example, government subsidies and tax benefits could promote exports of solar technology and electric vehicle components.

C. Trade Facilitation and Non-Tariff Compliance Support

Enhancing trade facilitation measures—such as expedited customs clearance and increased use of digital trade platforms—can reduce bottlenecks. Furthermore, establishing compliance support programs to assist exporters in meeting international standards is essential. An Export Compliance Office, for instance, could provide guidance on standards for food and pharmaceuticals to improve acceptance rates.

D. Strengthening Export Finance

To enhance the competitiveness of Indian exporters, access to affordable export financing is crucial. Strengthening initiatives like the Export Credit Guarantee Corporation of India (ECGC) and introducing sector-specific financial support can mitigate risks associated with global trade.

E. Diversification of Trade Partnerships

India should prioritize new trade agreements with emerging economies. Regions like Africa and Latin America offer untapped potential, especially for India’s pharmaceuticals, agricultural products, and textiles. A shift from a predominantly Western focus toward a more diversified trade policy could open new markets for Indian businesses.

The evolving global economic landscape presents both challenges and opportunities for India’s trade policy. While protectionist measures and regional alliances continue to reshape trade flows, India has an opportunity to adapt its EXIM policy strategically, ensuring that its economy remains resilient, competitive, and growth-oriented. Proactive measures, such as encouraging regional trade partnerships, revising tariffs, and supporting exporters in non-tariff compliance, will position India to navigate the complexities of modern trade. Restructuring the EXIM policy is not merely an option but a necessity for India to secure its role in an interconnected, yet increasingly fragmented, global economy.