Eco Survey:
Amid rising 'protectionism', India needs new strategic roadmap
New Delhi, Jan 31, 2025
The Survey also suggested that India should shift focus from merely wooing FDI to making itself more attractive for foreign investors through structural improvements.
The Economic Survey on Friday called for a new strategic trade roadmap for India, citing rising protectionism and heightened uncertainty amid a shift in global trade dynamics.
To address these challenges, India needs to remain competitive and enhance its participation in global supply chains, while continuing to reduce trade costs and improve trade facilitation to boost export competitiveness. The industry must also play its part by investing in quality, the Survey emphasised.
According to the Survey, India will face increasing threats from restrictive trade policies, such as the deforestation regulation and Carbon Border Adjustment Mechanism (CBAM) introduced by the European Union (EU) to prevent carbon leakage and protect global forests. These measures could restrict India’s exports and further widen the current account deficit.
This comes at a time when net foreign direct investment (FDI) into India is declining due to higher repatriation, successful exits by foreign investors, government incentives to retain investments onshore, and higher interest rates in hard currencies.
While gross FDI inflows have shown higher growth in the first eight months of the current financial year compared to the same period last year, a surge in repatriation has limited the expansion in net FDI.
The Survey also suggested that India should shift focus from merely wooing FDI to making itself more attractive for foreign investors through structural improvements.
“For example, most sectors in the country are open to foreign investors under the automatic route. The large amount of repatriations, as seen in the data, also suggests that it is easy to transfer returns on investments made in India,” the Survey noted.
“However, there is room to improve tax certainty and tax stability in matters such as the Advance Pricing Agreement (APA). India has simplified many of its laws, rules, and regulations over the years, leading to a significant improvement in the ease of doing business compared to previous years. At the same time, all statutory and regulatory authorities must bear in mind that international investors benchmark countries cross-sectionally, not longitudinally. This will determine the success of the government’s goal of making global companies produce in India for the world, integrating India into the global supply chain,” it added.
[The Business Standard]
