Is India Open For Business?

WTO logoThe Sixth Review of the Trade Policies and Practices of India offered an excellent opportunity to learn about the development of the trade, economic, and investment policies of India since its previous WTO Review in 2011, and its overall readiness for business.

WTO members commended India’s accelerating economic growth during the review period, particularly in the services sector, and the milder inflation in recent years.   However, members also recognized India’s need and willingness to overcome its structural bottlenecks, including fiscal deficit, shortfalls in infrastructure such as education, health care, transportation, and power supply, delays in project approval, difficulties in land acquisition, low manufacturing base and agricultural productivity, and cumbersome labor market regulations. In this respect, WTO urged India to pursue further tax reforms, which may increase government revenues, as well as to increase investment in infrastructure.

In terms of trade policy challenges, India’s share of world trade continues to be small, with only a slight increase from 1.3 percent in 2009 to 1.7 percent of global merchandise exports in 2013.  Further, given uncertainties in the international economic environment in general and within India’s major trading partners in particular, the country may experience future challenges in its trade sector. Moreover, domestic factors like weak infrastructure, rising wages and scarcity of skilled labor in the case of services are inhibiting growth of trade and related activities (WTO, 2015)

Finally, the rising incidence of non-tariff barriers, in the form of sanitary and phytosanitary (SPS) measures and technical barriers to trade (TBT), remain a major trade concern.  While tariffs have been going down globally (also as a concomitant to rising number of FTAs), the use of technical regulations/mandatory standards as barriers has grown, along with the growth of a variety of conformity assessment procedures.  The resultant increased transaction costs arising from complying with such regulatory requirements adds to the costs of India’s exports and erodes price competitiveness (WTO, 2015).

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