UNIT 15: ECONOMIC COCNERNS

Structure

15.0 Objectives
15.1 Introduction
15.2 India‘s Economic Landscape
15.3 Economy: Post-Independence
15.4 India and WTO
15.5 India vs ASEAN
15.6 India and G20
15.7 India‘s Trade Relations in South Asia
15.8 Trade and Foreign Policy
15.9 India at 2030
15.10 Let us Sum Up
15.11 Some Useful References
5.12 Answers to Check Your Progress Exercises

15.0 OBJECTIVES

In this Unit, you will be reading about India‘s main economic concerns. After going through this
Unit, you would be able to
 understand the growth imperatives for India‘s economy;
 understand and differentiate between the way Indian economy operated in the pre and post-
liberalisation era (pre and post 1991);
 its resultant impact on the foreign and trade relations, both in the region and globally; and
 explain the strengths and weaknesses of Indian economy and the global paradigms that are
impacting India.

15.1 INTRODUCTION

India is a mixed economy—world‘s sixth largest at $2.6 trillion and set to continue its steady run as

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the world‘s fastest growing major economy. One objective of India‘s economic policy has been to
protect its markets from international competition, minimise imports and encourage exports.
Attracting investments in India in the form of Foreign Direct Investment (FDI) and facilitating
foreign manufacturing industry to set up Indian operations is the other. ‗Make in India‘ campaign
launched by Prime Minister Narendra Modi in 2014 is based on the basic tenets of inviting
investments to help economy grow on the one hand and generate employment on the other. An
important view of this is the change in India‘s economic cooperation in the global markets.

Even though India produced over US$10 trillion in goods and services in 2018, it will take a while to
beat the top three: China, with a production worth $24 trillion; European Union (EU) with $20
trillion; and, the US with $18 trillion. India is now targeting to become a $10 trillion economy from
about $2 trillion today by 2030. The newly elected government for the second term under Prime
Minister Modi has set the target to become $5 trillion by the year 2024. In a globalised world, India,
during 2008-14, grew between 5-11 per cent and thereafter a little slower between 4-8 per cent. India
has shifted towards a market economy, privatised many state-owned enterprises, opened doors to
private sector and FDI and deregulated several industries. Needless to say, by becoming an integral
part of the global economy, India had to face several concerns relating to trade—bilateral and
multilateral, sanctions, dumping and negotiations—global and regional, from GATT to WTO. It is
interesting to note that this phenomenal growth has lifted more than a hundred million Indians out of
abject poverty. India‘s rapid economic growth has attracted international attention during last two
decades—so much so that it has world‘s fastest growing economy today.

15.2 INDIA’S ECONOMIC LANDSCAPE

India‘s GDP is estimated to have increased 7.2 per cent in 2017-18 and 7 per cent in 2018-19. India
has retained its position as the third largest Start-up base in the world with over 4,750 technology
start-ups. India's labour force is expected to touch 160-170 million by 2020, based on rate of
population growth, increased labour force participation and higher education enrolment, among other
factors. India's foreign exchange reserves were $405.64 billion in the week up to March 2019,
according to Reserve Bank of India (RBI).

During 2018-19 (up to February 2019), merchandise exports from India have increased 8.85 per cent
year-on-year to $298.47 billion, while services exports have grown 8.54 per cent year-on-year to

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$185.51 billion. India's FDI equity inflows reached $409.15 billion between April 2000 and
December 2018, with maximum contribution from services, computer software and hardware,
telecommunications, construction, trading and automobiles.

India is a country of contrasts, marrying huge potential with profound and chronic challenges. India‘s
economy was largely closed until the 1980s. In recent decades, a series of policy reforms have
gradually opened it to international trade; exports and imports have both grown. Its recent high
economic growth rates have improved the prospects that the world‘s second most populous country
will be able to raise incomes broadly for its 1.3 billion people and contribute to global economic
stability and growth.

Yet, India remains the largest pool of poverty in the world—nearly 300 million—and more than 800
million surviving on less than $2 a day, as per the national poverty line. Almost two-thirds of Indians
still live in rural areas and well over half of the population works in the agricultural sector, where
growth has stagnated at less than 3 percent during the last decade. By contrast, India‘s world-
renowned high-technology service sector has grown strongly in recent years but still employs less
than 1 per cent of the workforce.

Despite the recent expansion of India‘s trade with the world, its share of global trade is
disproportionately small given its size. India‘s bound tariffs are still relatively high, although applied
tariffs are much lower. Because of this gap, the government currently retains significant policy space
with respect to trade, including the ability to raise and lower tariffs in response to prevailing
conditions. Thus, the decisions it makes in trade negotiations to bind tariffs at lower levels or
otherwise change the rules governing its engagement with its trading partners constrains its existing
policy space and potentially has significant impact on the evolution of the economy.

The policy of economic liberalisation of India was put into operation with effect from 1991. A highly
crucial aspect of economic liberalisation is the liberalisation in the field of foreign trade. India has
been incrementally integrating into the global economy and liberalising its trade settings. For
example, trade in goods and services as a percentage of GDP has risen from 15.7 per cent in 1990 to
39.8 per cent in 2016 – around the same level as Australia – and India's simple average most
favoured nation applied tariff in 2016 was one-tenth of what it was in 1990–91.

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15.4 Economy: Post-Independence

From independence until the 1980s there was the general policy of planned regulation and import
substitution. After the 1980s, the government started to focus on some partial form of liberalisation.
And then came the phase after 1991, which focused on liberalisation, privatisation and globalisation.

During the first phase from 1947-52, in view of the fact that India‘s balance of payments vis-à-vis
dollar was adverse, a blueprint was prepared to enhance exports to bring in foreign exchange. This
required India to devalue its currency in 1949 to promote exports. The import policy during this
while was defence and limitations were imposed due to domestic deficiencies. India also could not
liberalise imports due to restrictions imposed by UK on the utilisation of the sterling balances, which
was a legacy of the period of war controls.

The second phase, which lasted till 1957, the government increasingly adopted liberalised trade
policy. Import licenses were granted and attempts were made to promote exports by liberalising
import controls. During the third phase from 1958 to 1975, trade policy was exhaustively reviewed
including by the Mudaliar Committee (1962). Rupee was once again devalued in 1966 and trade
policy attempted to develop exports and liberalise imports excessively.

During the last phase (1975-onwards) the government adopted a policy of import liberalisation with a
view to support export promotion. During the Janata party government (1977-79) import
liberalisation was also adopted to increase domestic supply of necessary goods to control hike in
price level and intention of further economic expansion and export promotion via import
liberalisation. The framing of the import-export policy (1985) was based on the recommendations of
Abid Hussain Committee.

The first major attempt at liberalisation that was unleashed by Prime Minister Narsimha Rao in 1991,
was actually made under Prime Minister Rajiv Gandhi‘s leadership subsequent to him coming to
power in 1984. The initial liberalisation process of 1985 attempted at policy changes across all major
sectors of the economy, i.e., industrial, trade, fiscal and monetary. As a consequence, during 1985-
90, exports surged witnessing a record annual growth of over 17 per cent in dollar terms.

Realising the limitations of the regulative procedures, the government announced a number of

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measures in 1991. Liberalisation was initiated to reduce restrictions and open up the respective
sectors of the economy; ease controls; and, end the license-inspector-Raj. The areas of focus
included: industrial licensing, export-import policy, technology upgradation, fiscal policy and foreign
investment. The reforms were comprehensive and widespread aimed for India to become a part of
global mainstream economy.

Measures included, duty exemption scheme; setting of Export Processing Zones (EPZs); Special
Economic Zones (SEZs); Export Promotion Capital Goods (EPCG) Scheme; Export Trading Houses
and Star Trading Houses; Export Promotion Schemes; liberalisation of gold imports; India‘s Foreign
Investment policy; Exchange Rate liberalisation; partial rupee convertibility; full convertibility on
trade account; capital account convertibility; and, Export-Import Policy and revamping the Export-
Import Bank.

Check Your Progress Exercise 1

1. Explain the nature of Indian economy post Independence?
2. Explain the phases of Indian economy pre-liberalisation.
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15.4 INDIA AND WTO

The Uruguay round of General Agreement on Tariffs and Trade (GATT) 1986-93, gave birth to the
World Trade Organisation (WTO). GATT was formed in in Geneva, 1948 to facilitate free trade in
order to encourage growth and development of member countries. On 1 January 1995, GATT was
replaced by WTO under the Marrakech Agreement, which holds the promise for the entire world
economy in respect of international trade. It became the legal institution of the multilateral trading
system, which deals with regulation of trade issues between participating countries. India has been a
founding member of both GATT and WTO. And post establishment of WTO, India‘s trade policies
changed dramatically as per WTO guidelines and policy directions.

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Some of the significant advantages to India under WTO have been: increase in foreign trade; increase
in agriculture exports; inflow of foreign capital investment; and, investments in services. It also had
its disadvantages, e.g., loss of domestic industries; effects on domestic prices; impact on
employment; decline in regional groupings like SAARC, ASEAN,etc.

Throughout the existence of WTO, the debate has raged as to what has India achieved due to this. It
has become a dispute settlement body and mostly been blocked by the US, paralysing the dispute
settlement mechanism. The WTO has been dominated by the developed countries, with US playing a
predominant role. The US is now becoming protectionist, moving away from its earlier stance of
supporting trade and investment liberalisation, insisting on tariff reductions. In order to realise the
goal of ‗America First‘, President Donald Trump has renegotiated North American Free Trade
Agreement with Canada and Mexico and so on. On the contrary, China has emerged as a supporter of
globalisation and free trade as it remains the biggest exporter in the world.

In this context, it becomes imperative for India to expand its trade and economic ties with regional
partners and focus on India becoming a manufacturing hub with the objective to become an exports
market.

15.5 INDIA vs. ASEAN

The Association of South East Asian Nations (ASEAN) comprises Indonesia, Singapore, Philippines,
Malaysia, Brunei, Thailand, Cambodia, Lao PDR, Myanmar and Vietnam. India‘s focus on a
strengthened and multifaceted relationship with ASEAN since liberalisation and its continued search
for economic space resulted in the ‗Look East‘ policy. This has today matured into a dynamic and
action oriented ‗Act East‘ policy. Prime Minister Narendra Modi at the 12th ASEAN India Summit
and the 9th East Asia Summit held in Nay Pyi Taw, Myanmar, in November 2014, formally
enunciated the ‗Act East‘ Policy.

As a reflection of the interest of ASEAN and India to intensify its engagement, the ASEAN-India
Partnership for Peace, Progress and Shared Prosperity, which sets out the roadmap for long-term
ASEAN-India engagement, was signed at the 3rd ASEAN-India Summit in 2004 in Vientiane.
According to Ministry of External Affairs (MEA), Government of India, a Plan of Action (POA) for
the period 2004-2010 was also developed to implement the Partnership. The 3rd POA (2016-20) was

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adopted by the ASEAN-India Foreign Ministers Meeting held in August 2015. Furthermore, ASEAN
and India have identified priority areas for the period of 2016-2018 and are already implementing
activities under it, which would contribute towards successful implementation of the 2016-2020 Plan
of Action, says the MEA communiqué.

India-ASEAN trade and investment relations have been growing steadily, with ASEAN being India's
fourth largest trading partner. India's trade with ASEAN stands at $81.33 billion, which is
approximately 10.6 per cent of India's overall trade. India's export to ASEAN stand at 11.28 per cent
of our total exports, says the ministry. In the backdrop of intensifying US-China trade war, it is
assumed to have been the main push factor for the enhanced regional cooperation.

In the wake of recent developments the US, India, Australia and Japan have collectively come out in
strong support of an ASEAN-led mechanism to preserve and promote rules-based order in the Indo
Pacific region where China is flexing its muscles. The four countries have affirmed their strong
support to ASEAN centrality and ASEAN-led regional architecture. The 10-nation Association is
considered one of the most influential groupings in the region and India and several other countries
are its dialogue partners.

15.6 India and G20

The G20, founded in 1999, with the aim to discuss policy pertaining to the promotion of international
financial stability, is the latest in a series of post-World War II initiatives targeted at international
coordination of economic and financial relations and policy. To start with it was Bretton Woods
System consisting of International Monetary Fund (IMF) and International Bank for Reconstruction
and Development (IBRD), later re-christened as the World Bank. This has since paved the way for
WTO.

The G20 membership comprises a mix of the world‘s largest advanced and emerging economies,
representing about two-thirds of the world‘s population, 85 per cent of global gross domestic product
and over 75 per cent of global trade. The members of G20 are Argentina, Australia, Brazil, Canada,
China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi
Arabia, South Africa, Turkey, UK, US and the European Union.

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India has emerged as an important member of G20—contributing and influencing the reshaping of
the world economic and financial order. India is pursuing an ambitious multi-pronged agenda for the
G20: ranging from deploying global surpluses for infrastructure development, inclusive
development, energy efficiency to global action to mitigate terrorism, reforming global financial
architecture, corruption and black money. India‘s core agenda centres around stable and sustainable
global growth for employment generation, stable financial markets and global trading regimes.
Accordingly, the country is pushing for poverty eradication and sustainable development, besides
trade and investment.

Heads of various nations, including India, US, Australia, among others, met at the recent G20
summit in Osaka, Japan during in June 2019 to address major global economic concerns and pave the
way for inclusive and sustainable growth, by dealing with social, economic and environmental
challenges. Suresh Prabhu, India‘s Sherpa to the G20, while addressing the Summit in Osaka, said
India has been working on tax evasion, economic offences and fugitive offenders running away
(from the country). He further added that the global community must act in unison to deal with issues
of people committing economic offences and running away. Prabhu also said that India strongly
believed that climate change was a reality, the biggest threat to humanity and the country was
focusing on clean and renewable energy to generate power.

The following efforts of India at G20 have been appreciated in a G20 status report:
1. India has done a good job to popularise the derivative instruments on exchanges;
2. The international body observed that India has done a good work in labour reforms in order to
boost workers‘ security and increasing female participation in the workforce; and,
3. India has initiated Start-ups to facilitate external borrowings by promoting innovation and
easing of doing business.

Check Your Progress Exercise 2

1. India has played a predominant role in WTO. Explain.
2. Explain how India gained a foothold in ASEAN countries.
3. How is India leveraging G20?
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15.7 INDIA’S TRADE RELATIONS IN SOUTH ASIA

In a report titled ‘A Glass Half Full: The Promise of Regional Trade in South Asia’, released
September 2018, the World Bank estimates India‘s potential trade in goods with South Asia at $62
billion against its actual trade of $19 billion. This is merely 3 per cent of the global trade and about
$43 billion below its potential. In the context of South Asia, an incremental approach toward deeper
trade cooperation can be very powerful and the region has witnessed examples of this in the form of
India-Sri Lanka air services liberalisation and India-Bangladesh border ‗haats‘, said Sanjay Kathuria,
lead author of the report and lead economist, World Bank.

In 2015, with total imports into South Asia from rest of the world of $510 billion, exports to rest of
the world of $329 billion and total trade with rest of the world of $839 billion, South Asia accounted
for 3 per cent of world imports as stated above, 1.99 per cent of world exports and 2.5 per cent of
world trade. Within South Asia, India is the most dominant economy. Out of total imports of $510
billion, imports into India (from outside the region) were $391 billion, thereby accounting for 77 per
cent of the total imports into South Asia. Similarly, with total exports of $264 billion (to outside the
region), India contributed 80 per cent of the total exports of $329 billion from South Asia as per a
report of Department of Commerce, Government of India published in September 2017.

South Asia and America are the two regions with which India has a trade surplus. However, while
India‘s trade surplus with America is only 16 per cent of India‘s exports to the region, India‘s trade
surplus with South Asia, is an extraordinary 87 per cent of exports to the region. This not only
signifies the current dominant status of India in South Asia, it also indicates that there is a
considerable potential for enhancing intra-regional trade. The World Bank estimates that if barriers to
trading with neighbours were removed, intra-regional trade in South Asia could increase from the
current $28 billion to $100 billion. Emphasis is, therefore, being placed on the removal of
impediments to such trade for realisation of the potential.

Based on trade data from Department of Commerce for 2016-17, the main characteristics of India‘s
trade with countries in South Asia are summarised below:
 Bangladesh is the largest trading partner in South Asia, followed by Nepal, Sri Lanka,
Pakistan, Bhutan, Afghanistan and Maldives.

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  The highest quantum of exports within South Asia is also to Bangladesh followed by Nepal,
Sri Lanka, Pakistan, Bhutan, Afghanistan and Maldives.
 83 per cent of the total exports in South Asia were made to Bangladesh, Nepal and Sri Lanka.
 Bangladesh alone accounted for more than 35 per cent of the exports with Nepal contributing
28 per cent, Sri Lanka around 20 per cent, Pakistan around 10 per cent; the exports to
Afghanistan, Bhutan and Maldives cumulatively accounted for only 7 per cent of the exports
to South Asia.
 The maximum imports are from Bangladesh followed by Sri Lanka, Pakistan, Nepal, Bhutan,
Afghanistan and Maldives.
 India enjoys a substantial trade surplus with all the countries in South Asia. In line with the
trend of exports and imports, the top three countries in terms of trade surplus are Bangladesh,
Nepal and Sri Lanka.
 The trade surplus as a proportion of exports is least for Bhutan and Afghanistan, indicating a
more balanced trade with them, compared to the other countries in South Asia.
 The trade surplus as a proportion of exports is highest for Maldives followed by Nepal and
Sri Lanka, showing India‘s dominance in bilateral trade with them.

Check Your Progress Exercise 3

1. India is an important trading partner with countries in South Asia. Explain.

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15.8 TRADE AND FOREIGN POLICY

Two of the most critical challenges are the accelerating trade war between the US and China on the
one hand and the foreign policy choices of India, on the other, where Indian and American interests
are clashing.

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The trade wars waged through tariff hikes and counter-hikes by the Trump Administration, on the
one hand and some big economies, on the other, notably China, have intensified during 2018-19. The
US has imposed $250 billion in tariffs on Chinese goods and Beijing has retaliated with $110 billion
on American exports. Canada and Mexico have added $20 billion more in response to Trump‘s steel
and aluminium tariffs.

President Trump maintained that the tariffs are a short-term price to open foreign markets for US
companies. However, the trouble is that the price for opening up markets for the US is rising fast and
it may not just be short-term. Negotiations with China are also standstill.

The rules-based multilateral order has long been buttressed by the assumption that economic
liberalisation and development would inexorably lead China to embrace Western-style economic
norms of global trade and investment. If China has refused to yield fully to those norms gracefully
ever since it entered the World Trade Organisation in 2001, would it not be unrealistic to expect that
it will accept to American demands disgracefully under the threats of tariffs and trade wars. Where
the ongoing problems in global trade will end is not clear now? Whichever way the trade feuds end,
tensions among countries could well be prolonged by differing approaches to trade, investment,
technology and the role of the state in the economy.

This poses trade and foreign policy challenges for India as well. On 1 October 2018, President
Trump termed India a ―tariff king‖ and reiterated his allegations that New Delhi has charged high
tariff rates on various American products. He claimed that after he warned against imposing similar
tariffs on import of Indian products, the Indian negotiators called him that they want to cut a trade
deal with the US. ―We have a country, take India. Good relationship. They want to make a deal now
because they don't want me to do what I'm going to do, what I have to. So, they (Indians) call us.
They didn't want to make a deal with anybody else," the US President had said.

The impression Trump has sought to create was that India folded under his threat of US action.
Trump has often accused India of imposing 100 per cent tariffs on US products. A month earlier, he
had said India wanted a trade deal with the US despite his administration's tough stance on the issue.

The language being used by the US President every time he comments on trade relations with India is
far from friendly. But then, India can hardly claim a high moral ground here. On a closer inspection,

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it can be found that India is among the most heavily protected economies in the world. Among
members of the BRICS—Brazil, Russia, India, China, South Africa—India has the highest effective
tariff rates on food items, automobiles and industrial inputs.

In June 2018, India had increased duties, which came into effect in August, on a range of
agricultural, iron and steel products imported from the US in a tit-for-tat move after the Trump
administration imposed higher tariffs on some Indian goods. In September, India again raised import
tariffs on 18 items and introduced a new tax on jet fuel as it seeks to narrow its current account
deficit, which has weighed on the rupee. All these gave fresh ammunition to the US administration.

Given India‘s own protectionist policies, the prospects of a full-blown Indo-US trade war could not
be ruled out. Until now, India‘s economy was affected by a tepid export market due to apprehensions
about the turns the global trade war might take. But if India is directly embroiled in it, it could be
catastrophic to the domestic industry, especially pharmaceuticals, apparel and textiles, iron and steel,
mineral fuels and fisheries. Slowdown in export demand and foreign investment outflows are likely
to exert further pressure on the Current Account Deficit (CAD).

Capital outflows and the FDI slowdown during this time contributed to the woes of the Indian
economy in a big way, as noted by the World Investment Report 2018 released by United Nations
Conference on Trade and Investment (UNCTAD) in June 2018. The amount of easy money that was
available due to quantitative easing by the US Fed is drying up, as the US central bank is in monetary
policy tightening mode. The report said FDI outflows more than doubled in 2017 to $11.3 billion
while FDI inflows fell 9 per cent to $40 billion during the year. The rupee will weaken more on
account of capital flows than the impact of trade problems.

India is the second largest importer (after China) of crude oil from Iran, on whose oil trade American
sanctions were re-imposed from 4 November 2018 following the Trump administration‘s unilateral
withdrawal from the nuclear deal concluded in 2015. India‘s bilateral relations with Iran is not just
oil-centric; they transcend oil to a long-term strategic engagement. India has invested in the
development of Iran‘s Chahabar port as a transit hub for Afghanistan, Central Asia and International
North-South Transport Corridor. India is developing two gas fields, Farzad-B and South Pars, in Iran.
Both countries cooperate on efforts to end the Afghanistan conflict.

There is a lesson for India in trade and technology policies devised for securing national economic

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and security interests. By not taking a negotiations path, India may have unwittingly opened a new
front in the protectionism debate, for example, on data which many say is the new oil.

India has been exploring the viability of rupee and barter-based trade agreements with crude oil
producing nations such as Russia and Iran. Russia was one of many countries looking to reduce their
dependence on the dollar amid increasingly harsh US tariff and sanctions policy. Iran was also
making efforts to make dollar irrelevant for its trade through a package of measures, including
increased trade using the euro and other currencies.

An important factor that sparked Sino-American trade friction was that on the technology front,
China continues to pursue its ‗Made in China 2025‘ strategy, the goal of which is to position it in the
driving seat in areas that its leaders have deemed essential for both economic growth and national
security. China, it appears, has erred in the coercive application of this strategy—it often amounted to
a shakedown as the country forced foreign companies to hand over their technology in return for
access to China‘s lucrative markets.

China has captured the Indian markets in a big way during last two decades, utilising the rules of the
WTO. Trade with China has increased from less than $1 billion in 1997-98 to $89.71 billion in 2017-
18. Not only India; China is causing havocs to many countries including US, European and many
other countries. In fact, China has a trade surplus with around 130 countries. Because of this,
industries in India, America, Europe and several other countries have been badly hit and this has led
to huge unemployment in all these countries.

15.9 INDIA AT 2030

In 2030, with a population of 1.5 billion and GDP of $10 trillion, India‘s per capita income will be
$6,600 (from $2,000 today compared to China $9,000 and Thailand $6,000). Even if we continue to
grow at 7 per cent annually, the per capita income will be lower than China today even 20 years from
now.

By 2030, 50 per cent of India‘s population will reside in urban areas. Economies of India‘s top 5
cities will be comparable to those of middle-income countries today. For example, according to a
McKinsey report, India’s Ascent – Five Opportunities for Growth and Transformation, Mumbai‘s

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economy in 2030, estimated at $245 billion, will be bigger than that of Malaysia today. Propelled by
Foreign trade policy (2015-20), India‘s exports are expected to reach $750 billion by 2019 and
thereafter, India‘s share in world trade is expected to double from the present level of 3 per cent by
2020 (World Bank estimates and Federation of Indian Export Organisation-FIEO estimates).

Total FDI inflow has increased from $45.15 billion in FY14 to $61.96 billion in FY18, according to
Department of Industrial Policy and Promotion, Government of India. India is also offering a
plethora of business opportunities and favourable policies, which are playing a key role in attracting
substantial investments across sectors. For instance, Amazon has committed investment of $5 billion
in the coming 5 years; IKEA, the world‘s largest furniture retailer plans to invest $1.5 billion; IFC,
the investment arm of the World Bank, plans to invest $6 billion by 2022 in several sustainable and
renewable energy programmes. Additionally, Boeing and Lockheed Martin are setting up
manufacturing bases in India, demonstrating that India is becoming a preferred investment
destination for foreign players.

On the manufacturing side, India is moving in the direction of Industry 4.0, with a high degree of
connectivity and richness of data. The Indian electronics goods industry is one of the fastest growing
industries and expected to be worth $400 billion by 2020, according to Ministry of Electronics &
Information Technology (MeitY), Government of India. India is now the second largest mobile
producer in the world having 120 mobile manufacturing units compared to 2 units in 2014.

The New Industrial Policy will replace the 27-year old existing policy and resolve bottlenecks caused
due to infrastructure, labour laws and the business environment. The policy aims at attracting $100
billion in FDI annually and is aligned with Make in India target of increasing share of manufacturing
to 25 per cent of GDP by 2022 from 16 per cent currently and create 100 million new jobs.

Check Your Progress Exercise 4

1. Explain the tariff related problems with US.
2. Does India have the potential to become $10 trillion economy?

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15.10 LET US SUM UP

In an integrated world, economic policies of a country usually affect other countries as well. The
policy of economic liberalisation of India was put into operation with effect from 1991. A highly
crucial aspect of economic liberalisation was the liberalisation in the field of foreign trade, decontrol,
de-licensing, removal of tariff barriers, facilitating foreign investments, spurring manufacturing with
focus on exports and employment generation. Ease-of-doing business, Start-up India, change in
labour laws, encouraging electronics manufacturing, industrial policy reform, demonetisation, Goods
and Services Tax (GST) are but few steps in putting India on a higher growth trajectory to achieve
2030 goals. Needless to say, the Narendra Modi Government 2.0 has already set the target of making
India $5 trillion economy by 2024.

15.11 SOME USEFUL REFERENCES

ASEAN-India, https://mea.gov.in/aseanindia/20-years.htm. Accessed on 3 July 2019

Chandrashekhar, C.P., 1998. "Aspect of Growth and structural change in Indian industry." Economic
and Political Weekly, 23(45/47), November.

Dutt, Ruddar and K.P. Sunderam, 2011. Indian Economy, New Delhi: S Chand & Company.

Finance Ministry, RBI working out mechanism to ensure smooth India-Iran trade: Commerce
Secretary, Economic Times, 25 September 2018: Available at:
https://economictimes.indiatimes.com/news/economy/foreign-trade/finance-ministry-rbi-working-
out-mechanism-to-ensure-smooth-india-iran-trade-commerce
secretary/articleshow/65953168.cms?utm_source=contentofinterest&utm_medium=text&utm_camp
aign=cppst. Accessed on 1 July 2019.
G20 summit: India pitches strongly for fight against fugitive economic offenders, MINT, 30 June
2019. Available at https://www.livemint.com/news/india/g20-summit-india-pitches-strongly-for-
fight-against-fugitive-economic-offenders-1561806485004.html. Accessed on 1 July 2019.

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15.12 ANSWERS TO CHECK YOUR PROGRESS EXERCISES

Check Your Progress Exercise 1

1) Your answer should be based on Section 15.3

2) Your answer should be based on Section 15.3

Check Your Progress Exercise 2

1) Your answer should be based on Section 15.4

2) Your answer should be based on Section 15.5
3) Your answer should be based on Section 15.6

Check Your Progress Exercise 3

1) Your answer should be based on Section 15.7

Check Your Progress Exercise 4

1) Your answer should be based on Section 15.9

2) Your answer should be based on Section 15.9

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