The world economy has undergone tremendous structural shifts in the last few years due to rising influence and role of the emerging economies across the globe. This has led to a shift of balance of powers between the global north and the global south. This is perhaps the most significant geo-political development of the recent times.
The emerging economies including countries like India, China and Brazil has evolved from being policy takers to policy makers. This development has brought the emerging economies to the forefront where they actively participate in the trade negotiations and global economic governance at various international fora.
India has already marked its presence as one of the fastest growing economies of the world. As per the IMF forecast, the Indian economy is projected to grow at 7.5 per cent for fiscal year 2016-17. It has emerged as the fourth largest economy globally with a high growth rate and also improved its global ranking in terms of per capita income.
Over the years, India has given a new direction to its economic and political diplomacy. It has negotiated comprehensive free trade agreements with some of the important economies of the world which include Japan, Korea and ASEAN. Currently, India is negotiating comprehensive trade agreements with EU, Australia, Canada and New Zealand.
One of distinct features of India’s growing integration with the world is its deepening economic engagement with East Asian countries. Following the ’Look East Policy’, adopted in early 1990 and under its new phrase ’Act East Policy’, India’s economic and political engagements are being renewed with a series of proactive measures. Today, while China is India’s major trading partner, Japan and Korea are major sources of foreign direct investment into India.
India has been playing a more pro-active role in multilateral trade and climate change negotiations. It has emerged as an important voice in G-20. It is a member of formidable alliances such as IBSA and BRICS to champion the cause of South-South cooperation.
In the run-up to the 2015 APEC Summit in Manila, a debate started on the possible accession of India into AsiaPacific Economic Cooperation (APEC). APEC is of major economic significance as it includes the largest and most dynamic economies, namely – USA, China, Japan, Canada, Australia, Taiwan, Russia, Indonesia, Mexico and South Korea. Most of these economies are important trade and investment partners to India.
While Indian industry has responded very well to this new emerging dynamics of global economy, one of the areas where industry has to work hard is integrating itself into the Global Value Chains (GVCs). Building production value chain is very important. Globally, value chains are important drivers of both trade and investment. More than fifty per cent of global trade is currently happening within GVCs.
India, at present, has limited number of products where it owns GVCs. As a result, its’ share in total value added created by global trade is not more than 1 per cent. India’s exports and imports of intermediates, one of the important indicators of integration into GVCs, are much smaller than countries like China.
Government and industry together, therefore, need to seriously think and discuss the whole dimension of value chain. This would require initiating several policy measures such as import duty structure across the entire value chain, improving trade infrastructure and upgrading the existing standards for goods and services.
Confederation of Indian Industry