India’s Trade Policy in the 21st Century This book analyses India’s trade policy evolution in the last two decades in the broad context of trends and patterns in global trade and, in particular, with reference to the emergence of global value chains (GVCs). Through an in-depth analysis of its trade policy evolution in the 2000s, the author explains India’s limited share of global merchandise trade, especially manufacturing trade and relatively low GVC integration. The book discusses India’s trade policy, pattern and global trade participation not just in the comparative context of China as is true of most analyses relating to the Indian economy, economic reforms and trade liberalization in India but also in the context of regional economies like Vietnam, Thailand, Malaysia, Bangladesh and other emerging market economies (EMEs) that have successfully integrated with GVCs/RVCs (regional value chains) in the period under reference. Progress and nature of India’s value chain participation relative to other economies has also been evaluated in this context. The book further examines policy developments with respect to traditional trade measures like tariffs and export schemes, trade and GVC related policies in special economic zones (SEZs), as well as GVC- facilitating policy instruments such as regional/free trading agreements (RTAs/ FTAs) and investment treaties. Three sectoral case studies – automobiles, textiles and apparel and electronics – are presented to examine India’s participation in these dynamic GVC intensive sectors. An important study of one of the fastest growing economies in the world for almost two decades, this book will be of substantial interest to academics and policymakers in the fields of Economics, International Economics, Foreign Policy, International Economic Relations, Economic Diplomacy, India-Southeast/East Asia economic relations. Amita Batra is Professor of Economics at the Centre for South Asian Studies, School of International Studies, Jawaharlal Nehru University, India. Her previous publications include Regional Economic Integration in South Asia: Trapped in Conflict? (2013), also published by Routledge. Routledge Studies in the Growth Economies of Asia 142. How China’s Silk Road Initiative is Changing the Global Economic Landscape Edited by Yuan Li and Markus Taube 143. Trade Unions and Labour Movements in the Asia-Pacific Region Edited by Byoung-Hoon Lee, Sek-Hong Ng and Russell Lansbury 144. International Entrepreneurship: A Comparative Analysis Susan Freeman, Ying Zhu and Malcolm Warner 145. Ritual and Economy in Metropolitan China A Global Social Science Approach Carsten Herrmann-Pillath, Guo Man and Feng Xingyuan 146. Cyber Risk, Intellectual Property Theft and Cyberwarfare Asia, Europe and the USA Ruth Taplin 147. Changing Labour Policies and Organization of Work in China Impact on Firms and Workers Ying Zhu, Michael Webber and John Benson 148. Vietnamese Labour Militancy Capital-labour antagonisms and self-organised struggles Joe Buckley 149. Economic Successes in South Asia A Story of Partnerships Shahrukh Rafi Khan 150. Ersatz Capitalism and Industrial Policy in Southeast Asia A Comparative Institutional Analysis of Indonesia and Malaysia Fabian Bocek 151. India’s Trade Policy in the 21st Century Amita Batra India’s Trade Policy in the 21st Century Amita Batra First published 2022 by Routledge 4 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 605 Third Avenue, New York, NY 10158 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2022 Amita Batra The right of Amita Batra to be identified as author of this work has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record has been requested for this book ISBN: 978-0-367-75223-1 (hbk) ISBN: 978-0-367-75547-8 (pbk) ISBN: 978-1-003-16290-2 (ebk) DOI: 10.4324/9781003162902 Typeset in Times by Deanta Global Publishing Services, Chennai, India In memory of my mother Phul Batra and her boundless love for which I am eternally grateful. Contents Illustrations viii Preface ix 1 Introduction 1 2 Going back: Tracing the history of trade policy reform in India: 1978–1990s 9 3 The 2000s: Global trade shifts: rise of GVC-led trade 28 4 The 2000s: India in global trade 49 5 Situating India’s trade policy in the 2000s 77 6 GVC-specific elements in India’s trade policy 112 7 GVC restructuring and India’s trade policy imperatives 134 8 Conclusions and reform priorities 156 References 167 Index 177 Illustrations Tables 2.1 Comparative trade (%) and tariff (%) profiles in 2000 14 2.2 Simple average tariff: sector-wise 15 2.3 Tariffs by products: average import weighted rates (%): 1991–1998 16 2.4 Average unweighted tariffs by stage of processing 16 2.5 Types of NTBs imposed on India’s imports:1996–1997 to 2000–2001 19 3.1 Variation in trade intensity of select GVC dynamic sectors 35 4.1 Asian countries in top-ten leading exporters/importers in world merchandise trade: 2018 50 4.2 India’s trade to GDP ratio in comparison with select developing countries 51 4.3 Net trade in goods (BoP, Current US$) 52 4.4 External balance on goods and services (% of GDP) 52 4.5 India: trade in ‘True Intermediate’ products 59 4.6 China: ‘True Intermediate’ goods exports in the auto sector 59 4.7 Commodities that have entered India’s top-50 exports for the first time in 2018 in the period 2000–2018 60 4.8 GVC participation index, 2015–2016 (% share in total gross exports) 62 4.9A Backward integration: intensity of foreign value added in gross exports: all manufactures and GVC dynamic sectors 65 4.9B Backward integration: sector-specific relative FVA intensity in gross exports 67 4.10 India’s forward linkages: all manufactures and three dynamic sectors 69 4.11 India’s forward linkages with ASEAN: four-dimensional analysis 71 5.1 Progressive reduction in peak customs duty, 2000–2010 80 5.2A India’s tariff structure:2010/2011–2020/2021 81 5.2B Distribution of India’s MFN tariff rates (% of tariff lines) 81 5.3 Number of preferential lines in India’s FTAs 97 6.1 India’s FTAs: depth and coverage: comparative perspective 119 6.2 ASEAN–India FTA: depth and coverage: comparative perspective 122 6.3 WTO plus policy area coverage in India–ASEAN FTA 122 6.4 FDI equity inflows in India: top-ten investing countries (US$ million) 130 Preface Trade policy in the present times is no longer only about tariffs and quotas. Traditional trade of final goods produced by one country and consumed by another is only a modest proportion of global trade. A major proportion of global trade happens in the form of the movement of commodities in production networks that are geographically dispersed. The increasing complexity of production networks, also called global value chains, in the 21st century has necessitated that trade policy evolve beyond traditional trade instruments to new age trade measures that facilitate the movement of parts and components across multiple borders. While most lead trading nations in the world, as well as many developing economies, have undertaken domestic trade reforms to align with the evolving global trade context, India has been slow to adapt. This book is an attempt to highlight the limitations of India’s trade policy as it has evolved in the past two decades and thereby help identify and prioritise necessary reforms. Coincidentally, trade policy issues that have emerged at the forefront in the recent past, such as preferential trade agreements, global value chains and deep regional economic integration processes, have been my areas of research and inter- est for more than a decade now. I have been fortunate to both present and exchange ideas on these subjects with some of the best experts in the country, in the region and around the world. I thank my colleagues and friends who have contributed to shaping my ideas on these issues. My views on the subject have also been for- mulated in the course of my occasional writings in the Business Standard and the feedback that I have received in response to my columns over the last three years. My biggest motivation as an academic and teacher in writing this book and highlighting the significance of new age trade instruments in global trade evolu- tion and India’s trade policy context is to underscore the necessity of teaching and formulating courses around these issues at the undergraduate- and graduate- level teaching in India. It is my fervent wish and hope that the book draws more and more younger minds to undertake research in an area that remains under- researched in the Indian context. Finally, following the dictum of ‘never waste a crisis’, I have tried to put to good use this time of home isolation during the pandemic to write this volume. I hope it will be useful and of interest to a wide audience of policymakers, students and teachers.