A trade deal that tests India’s competitive confidence
Trade agreements reward nations ready to compete
360° Perspective Analysis
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Context
The article analyzes the recently implemented Comprehensive Economic and Trade Agreement between India and the UK. It highlights the benefits of duty-free access for Indian labor-intensive exports and the strategic importance of lowering import tariffs to boost domestic manufacturing competitiveness. The author argues that exposing domestic industries to competition, rather than shielding them with perpetual protectionism, is crucial for long-term economic growth.
UPSC Perspectives
Economic
The editorial emphasizes a critical shift in trade philosophy: moving away from viewing import tariffs solely as a protective shield for domestic industries. By lowering duties on items like British cars and Scotch whisky in a phased manner, India is adopting a strategy of calibrated globalization. This exposes domestic manufacturers to international competition, acting as a catalyst for efficiency and innovation. Prolonged protectionism, characterized by high import tariffs, often breeds complacency in domestic industries, leading to suboptimal product quality and inefficiency. The article cites the Indian auto industry as an example, where segments exposed to competition improved significantly, while sheltered segments stagnated. From a UPSC perspective, this touches upon the debates surrounding versus export-led growth. Candidates should analyze how carefully negotiated (FTAs) can act as structural reforms, compelling domestic industries to enhance their global competitiveness while ensuring sufficient time for adjustment through phased tariff reductions and quotas.
International Relations
The India-UK trade pact signifies a deepening of bilateral economic ties, aiming to double bilateral trade to $56 billion by 2030. A significant achievement in this agreement is addressing the long-standing grievance regarding double social security contributions by Indian professionals working in the UK. The implementation of the Double Contribution Convention provides immediate financial relief to workers and employers, removing a major irritant in the bilateral relationship. Furthermore, securing duty-free access for 99% of India's exports (by value) levels the playing field against competitors like Bangladesh and Vietnam, who already enjoyed preferential access to the UK market. This highlights the strategic importance of FTAs in a fragmented global trade environment where multilateral negotiations at the (WTO) have often stalled. UPSC questions could explore the strategic shift in India's trade policy, moving from a cautious approach to actively negotiating comprehensive FTAs with developed nations like the UK and Australia to secure market access and integrate into Global Value Chains (GVCs).
Social
The true success of this trade agreement, according to the author, lies in its potential for employment generation. By securing zero-duty access for labor-intensive sectors like textiles, leather, footwear, marine products, and processed foods, the agreement targets the core of India's demographic challenge: creating productive, formal jobs. Industries in clusters like Tiruppur (textiles) and Agra (footwear) operate on thin margins, and tariff elimination makes them significantly more competitive globally. This aligns with the broader objective of inclusive growth by providing employment opportunities to the semi-skilled workforce. The article underscores that trade policy is ultimately about job creation. For UPSC Mains (GS-3), candidates should connect trade policy with the imperative of job creation, analyzing how promoting exports in labor-intensive sectors is essential for absorbing the surplus workforce transitioning from agriculture and achieving the goals of schemes like .