. 22/10/2024 1:07 PM
Introduction
India is currently navigating complex challenges in its trade negotiations while simultaneously positioning itself as a global leader in innovative technologies. The country has adopted a cautious strategy in its trade agreements, particularly with smaller nations like Oman and Peru, to address a widening trade deficit. Concurrently, initiatives like the National Mission on Interdisciplinary Cyber-Physical Systems (NM-ICPS) are fostering technological advancements through innovation hubs, aiming to bolster India's economic growth and self-reliance.
Reasons for the Strategic Pause
India has paused negotiations for free trade agreements (FTAs) with smaller countries due to concerns that previous agreements have disproportionately benefited partner nations. This shift is largely driven by the widening trade deficit and the increasing outflow of investments. India’s trade with countries such as the UAE and ASEAN has led to a surge in imports, exacerbating the trade gap.
Widening Trade Deficits
ASEAN Partnership: ASEAN accounted for 11% of India's global trade, with bilateral trade reaching approximately USD 122.67 billion in 2023-24. However, trade benefits have favored the ASEAN region, as evidenced by a 234.4% increase in imports from ASEAN between FY 2009 and FY 2023, compared to only a 130.4% increase in exports from India. Consequently, India's trade deficit with ASEAN ballooned from USD 7.5 billion in 2011 to about USD 44 billion in 2023.
UAE Trade Relations: Following the Comprehensive Economic Partnership Agreement (CEPA) signed in May 2022, India's trade deficit with the UAE widened by over USD 5 billion within eight months. Exports grew by 11% to USD 20.25 billion, while imports surged by 24.4% to USD 36.23 billion, highlighting the need for a reevaluation of trade dynamics.
Strategies for Improvement
To counteract these trends, India is adopting several strategies:
Development of a New SOP: The Commerce Ministry is drafting a new Standard Operating Procedure to streamline trade negotiations. This SOP will emphasize modern chapters on labor and environment while focusing on resolving tariff asymmetries that have disadvantaged India in past agreements.
Shifting Focus to Larger Markets: India is prioritizing trade agreements with larger markets such as the European Union and the UK, as well as geopolitically important countries like the Maldives. The pause in negotiations with smaller nations aims to ensure that India receives commensurate returns from its trade partnerships.
Review of Past FTAs: The ongoing review of the ASEAN trade agreement aims to address significant trade deficits that have emerged post-COVID. The review process is expected to focus on tariff asymmetry and its impact on Indian trade.
Tightening Trade Norms: To address concerns regarding the influx of Chinese goods, India is implementing stringent rules of origin and conducting anti-dumping investigations to prevent rerouting of Chinese products through ASEAN countries.
Challenges in Trade Negotiations
India faces several challenges in its trade negotiations, including:
Current Negotiating Capabilities: A lack of subject matter expertise and institutional memory in trade negotiations puts India at a disadvantage compared to more experienced foreign negotiators.
Concerns over Imports from China: India's exit from the Regional Comprehensive Economic Partnership (RCEP) negotiations was driven by fears of increased imports from China, further complicating the regional trade landscape.
Global Economic Slowdown: The ongoing global economic slowdown, coupled with rising tariffs and non-tariff barriers, presents additional hurdles for India’s trade strategy.
National Mission on Interdisciplinary Cyber-Physical Systems (NM-ICPS)
Launched in December 2018 with a budget of ₹3,660 crore, the NM-ICPS aims to establish India as a global leader in Cyber-Physical Systems (CPS) by integrating the physical world with computational systems. This initiative is driving breakthroughs in areas like artificial intelligence, robotics, cybersecurity, and autonomous navigation.
Outcomes and Achievements
In just six years, the NM-ICPS has yielded remarkable results, including:
Development of 1,500+ new technologies and tech products.
Formation of 650+ startups and spinoff companies.
Creation of 16,000+ jobs and training for over 150,000 individuals in entrepreneurship.
Innovation Hubs
Several innovative hubs have emerged under this mission, showcasing significant advancements:
C3iHub at IIT Kanpur: Provides 24/7 cyber threat protection with advanced technologies like intrusion detection and malware analysis.
TiHAN Foundation at IIT Hyderabad: Focuses on autonomous navigation, offering a state-of-the-art testbed for aerial and terrestrial systems.
AWaDH at IIT Ropar: Promotes sustainable agriculture and water management through collaborations with global partners, resulting in innovations like the Digital Entomologist.
Emerging Startups from Innovation Hubs
Startups emerging from these innovation hubs include:
Botlabs Dynamics: Specializes in drone-swarming technology valued at over ₹160 crore.
COMRADO Aerospace: Develops UAV solutions for military and commercial applications.
Mindgrove Technologies: Creates India's first commercial chip for secure IoT environments.
Ayu Devices: Innovates in healthcare diagnostics with the AyuSynk digital stethoscope.
The Way Forward
To sustain momentum, innovation hubs are expected to become self-funding through commercialization. India aims to foster closer collaboration between industries and research institutions to co-create innovations. The upcoming Generative AI for Bharat project at IIT Bombay, a collaborative effort between public, private, and academic sectors, will focus on developing multilingual foundational models.
India's strategic pause in trade agreements reflects a measured approach to addressing trade deficits and outflows of investment while enhancing its negotiating capabilities. At the same time, the NM-ICPS initiative demonstrates the country’s commitment to becoming a global leader in technological innovation. Together, these strategies position India to leverage its economic potential, ensuring a sustainable and self-reliant future.