Eco Survey: Need for 'new strategic trade road map' with focus on quality

The Economic Survey 2025 on Friday called for a "new strategic trade roadmap" for India to boost exports, due to rising "protectionism" and heightened "uncertainty", amid a shift in global trade dynamics.

 

To deal with the challenges, the Survey suggested that India needs to remain competitive and enhance its participation in global supply chains, cut trade costs and improve facilitation to boost export competitiveness. On the brighter side, India can increase its share in overseas markets despite the trade tensions, if the government and the private sector focus on "quality and efficiency".

 

The Survey warned that while tariffs have declined globally, non-tariff policy measures have increased across countries, especially after the Covid-19 pandemic, and was further fuelled by the conflict between Russia and Ukraine. While non-tariff measures (NTMs) implemented by countries aim to protect public health and environment, they often increase compliance costs for exporters.

 

It flagged that going ahead, the imposition of climate-change-related NTMs initiated by the European Union (EU) is expected to hurt exporters in emerging economies such as China, India, and Turkey. It includes  restrictive trade policies such as Carbon Border Adjustment Mechanism (CBAM) and EU Deforestation Regulation (EUDR).

 

“In short, it is hard to shake off the conclusion that both CBAM and EUDR are trade protection measures garbed in the language of climate and environment. The game and the end goals are the same, but the tactics keep changing. Labour standards, gender, democracy, emissions and deforestation, the innovative list will keep evolving with time…Today’s developed countries do not conform to the standards that they expect from developing countries at a similar stage of development,” the Survey said.

 

These regulations are expected to kick-in less than a year and have the potential to restrict India’s exports and widen the current account deficit.

 

This comes at a time when the net foreign direct investment (FDI) into the country is declining. It is mainly because of successful exits by foreign investors, incentives given by many governments for investments to stay onshore and higher interest rates in hard currencies, the Survey said.

 

Even as gross FDI inflows have shown a higher growth in the first eight months of the current fiscal to $55.6 billion, up 17.9 per cent on-year, a surge in repatriation has reined in the expansion in net FDI.

 

It also suggested that India should stop "wooing FDI" and making itself more attractive for foreign investors. “For example, most sectors in the country are open for foreign investors under the automatic route. The large amount of repatriations, as witnessed in the data, also suggests that it is easy to transfer the returns on investment made in India,” the Survey said. 

 

Dependence on China

 

The Survey also flagged China's dominance in the global manufacturing and energy transition ecosystems. For instance, several solar equipment manufacturers significantly depend on Chinese supply chains and related services. “The single-source concentration risk in several product areas exposes India to potential supply chain disruptions, price fluctuations and currency risks,” it said.

 

Further, it also flagged China’s significant share of critical mineral processing and production globally across key commodities such as nickel, cobalt, and lithium. China is responsible for processing 65 per cent, 68 per cent and 60 per cent of the global output, respectively. Similarly, in the case of rare earth minerals, China contributes to 63 per cent of global mining and 90 per cent of global processing output.

 

Tariff policies

 

The Survey further said that an increased emphasis on free trade and enhanced collaboration in international trade policies have resulted in reduced border tariffs among nations. For instance, between 2000 and 2024, the average tariff rates in

India decreased from 48.9 per cent to 17.3 per cent.

 

“At a broader level, India's import tariff policy has evolved over time, balancing domestic policy goals with the need to integrate into the global economy. Tariffs vary by sector, with considerations like protecting sensitive sectors from foreign competition…Over time, several efforts have been made to rationalise tariffs further and address the inverted duty structures,” it said.