2 weeks ago
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India needs to take greater efforts to simplify its tariff policy and enhance its trade competitiveness and redress its ‘limited’ integration with global value chains, the Asian Development Bank (ADB) said on Thursday, stressing that this was particularly imperative for its manufacturing sector, which was critical to sustain the growth trajectory in the medium term.
India’s growth strategy was predicated on substantial export growth that can be achieved through integration into global value chains, and the $2 trillion in exports by 2030 goal set by the government would require considerable growth, the ADB said in its Asia Development Outlook report.
“Increasing goods exports requires India to integrate into global value chains (GVCs), which must entail India specialising in stages of production where it has a comparative advantage, as opposed to necessarily looking to be present in the entire value chain,” the lender noted, recommending further policy action was needed to improve India’s trade competitiveness and integration into GVCs. “A simplified tariff policy is needed along with continued efforts to improve trade and logistics infrastructure,” it added.
While India was already a big player in services and knowledge-intensive sectors, which were a growth engine and would continue to remain so, what happened in the manufacturing sector was critical for sustainable growth in the medium term, remarked Rana Hasan, regional lead economist for South Asia at the ADB. Trade policy and trade facilitation efforts were central on this front, he said.
“As the manufacturing sector grows, and this is really the key, I think it’ll give rise to stronger direct linkages between growth drivers in India and the South Asia region that tends to be amongst the sub-regions of the world that is less integrated with the rest of the world and also tends to trade much less with one another, as compared to other sub regions like ASEAN,” he pointed out.
Historically, India had been little engaged in highly integrated GVCs, the ADB noted.
