India’s GDP Growth @ 6.3% & Future of Trade by 2030?

Global trade is set to grow by 70%+ by 2030, with a shift towards more inclusive and sustainable practices. Trade policy, for its part, is evolving in step with this transformation. Bi-lateral, regional and multilateral trade deals, the bread and butter of trade policy, are being upgraded and modernized to accommodate new realities. But technological innovation is also impacting policy and is being evidenced through solutions such as blockchain-enabled smart-contracts used for more immediate settlements. In light of all of this dynamism, policy focus is shifting to regulatory coherence across jurisdictions.

 Globalization needs to become more equitable to provide smaller businesses the chance to participate in global supply chains. The growing reach of technology and e-commerce will continue to unlock new opportunities and make global trade more accessible – more SMEs are likely to participate than ever before. Wider adoption of emerging technology, such as e-commerce platforms, will benefit smaller companies by providing more flexibility, connection to buyers and suppliers and easier access to finance, supporting inclusive economic growth.

Digitalization: The increased adoption of digital trade platforms will make trade faster, more transparent and secure. Blockchain, AI and the IoT will be game changers in the future. Technologies that reduce costs and enhance transparency, trust and efficiency across supply chains will continue to gain traction and help grow global trade.

Risk diversification: Companies will accelerate diversification of their supply chain locations and partners to protect against future disruptions Global supply chains will shift away from the fast and efficient but vulnerable ‘just-in-time’ model to a more capital-intensive ‘just-in-case’ model, where supply chains are diversified to protect against future disruptions, such as trade wars, climate change, technology risks, or even another pandemic. This may result in a broader range of emerging manufacturing hubs within Asia, such as Vietnam, India, and Indonesia.

India to grow @ 6.3% from 2021-2030:

The S&P Global Market Intelligence on Tuesday projected India’s real gross domestic product (GDP) growth to average 6.3% annually between financial years 2021 and 2030, enabling it to overtake Japan and Germany to become the world’s third-largest economy in nominal US dollar terms.

Real income per capita is projected to achieve significant average growth of 5.3 per cent, with Indian households becoming the greatest spenders among G20 economies, the firm said in a report, assuming continued structural reforms, including trade and financial liberalisation, infrastructure and human capital investment, and labour market reform.

“To circumvent stakeholder opposition, the thrust of economic policy will be to make India structurally more self-reliant. Doing so serves three goals: reducing import dependency, providing the labour force with suitable employment opportunities, and creating a more viable market for domestic and foreign investors,” the report said.

The S&P report said the government was banking on production-linked incentive (PLI) schemes as tools to make the Indian economy more export-driven and more inter-linked in global supply chains. “A greater share in global value chains would also contribute to India’s goals of improving leverage in multilateral negotiations and gaining advantage in its competition with mainland China.

However, meant to protect India’s domestic industries, the country’s import tariffs are now hurting various sectors. Experts suggest that this would hamper India’s chances of becoming a $5-trillion economy by FY27, as estimated by the International Monetary Fund.

A strong domestic manufacturing sector has to be built before the country can aim to be an export powerhouse. So, making crucial raw materials cheaper is the way to encourage manufacturing, experts say. However, in India, high import duties on steel, polymers, cotton and aluminium, among others, are making it difficult for manufacturers to be competitive globally. It is especially painful for the cash-starved MSME sector as the duties can range between 5% and 17%, according to various experts.