Need sharper trade focus on Asia, neighbours: NITI CEO B V R Subrahmanyam

Says no sector should be protected and markets need to be opened up globally

At a time when India is struggling to clinch a trade deal with the US, NITI Aayog Chief Executive Officer (CEO) B V R Subrahmanyam on Monday batted in favour of a sharper Asia focus — including China — in the country’s trade strategy, along with stronger trading arrangements with neighbouring nations.

 

“Focus on Asia big time. There is no escaping that. If you are not able to sell much to China, it’s pointless, because it’s $18 trillion — you can’t avoid that economy. You should be able to compete and sell. Good countries have trade surpluses in China… If you are competitive, they will buy your stuff,” Subrahmanyam said during the launch of the Aayog’s Trade Watch quarterly report, which featured an analysis of India’s leather and footwear trade. Signalling that the US’ 50 per cent tariffs on Indian goods are unlikely to create a major disruption till Christmas, the NITI Aayog CEO, however, said that ‘summer’ is going to be an issue if both countries do not work out a trade deal.

 

Noting that India “missed the bus” vis-a-vis rivals like Vietnam when factories and jobs were shifting around the world, due to high tariffs imposed on inputs with a preponderance to protect large domestic firms, the CEO stressed this has hurt the competitiveness of labour-intensive sectors like footwear.   

 

Subrahmanyam asserted that no sector should be protected and markets need to be opened up and competitive globally. “You should be able to sell as you import. If you try to protect by cutting out imports, you will not export either and then you will become more and more backward. The world’s largest exporter – China, is also the world’s 2nd largest importer,” he added.

 

Subrahmanyam said most countries have maximum trade with their neighbours. “It's a misfortune that we are in a very difficult geography. But who are the biggest trading partners of the US? Mexico and Canada. It’s natural. The entire EU trades 50 per cent within itself. Bangladesh is our 6th biggest trading partner, Nepal used to be in the Top 10. If you don’t have strong neighbourhood trading arrangements, you actually are at a disadvantage,” he emphasised. 

 

Though Subrahmanyam didn’t mention China dominated Regional Comprehensive Economic Partnership (RCEP) on Monday, in November last year, he had advocated India joining both RCEP and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). However, trade minister Piyush Goyal has repeatedly said India has no intention to join RCEP that it exited at the last minute in 2019 after years of negotiations.

 

While about 40 per cent of India’s exports in FY25 were destined for the rest of Asia, this was dominated by West Asia (13 per cent), with a comparatively smaller share of shipments going to ASEAN (8.9 per cent), North-East Asia (7.8 per cent), and South Asia (6 per cent) despite these regions being considered as strong drivers of global economic growth.

 

On Sunday, External Affairs Minister S Jaishankar had flagged the need for India to diversify its trade, noting that most of its initial FTAs were with the Asean bloc or its individual member states, which compete with India, and the nature of their supply chains is such that they also provided a pathway to Chinese goods.

 

“So, I would very honestly say our focus should be on FTAs with economies that are not competitive, where there is really deep sustainable predictable and real market economy which is why we are pleased with the (FTA) with UK,… we are serious about the EU FTA,… we are striving for an understanding with the US,” he had said.  

 

On the US deal

 

Subrahmanyam, however, exuded confidence that a trade deal would be concluded between India and the US soon, as both countries are committed to having a mutually beneficial bilateral trade pact.

 

Asked on the impact of the punitive 50 per cent tariffs on Indian goods, Subrahmanyam said, “Building a trade channel is difficult, and unwinding a trade channel is also difficult… No impact will happen till Christmas." The NITI Aayog CEO, however, noted that 'summer' is going to be an issue if both countries do not settle the trade deal.

 

“We are at a disadvantage… 50 per cent tariffs are a major, major cost factor... There is no escaping that. People are hopeful that if the trade deal comes through by November, then there will be no disruption," he said.

 

Minister Jaishankar had said on Sunday that any trade deal between India and the US needs to respect New Delhi’s “bottom lines and red lines”, adding that both sides have not yet arrived at a “landing ground” for their trade discussions.

 

Missed Bus

 

Niti’s trade report – the fourth in its quarterly series – shows that India imposes ₹10 per cent tariffs on key footwear inputs, while Vietnam and Italy have near-zero rates, giving Vietnam a cost advantage, and that India’s reliance on imports for sourcing, combined with higher duties, makes it less competitive than countries with lower tariffs.

 

“Vietnam’s exports, in terms of world share, in the same set of products is 30 per cent. And the funny thing is around 2007-08, we were both around about 1.5 per cent. We are still there, and they are over 30 per cent of the world trade. That's a very, very stark story that we missed the bus. When these jobs and these factories were shifting around the world, India didn’t get them,” Subrahmaniam added.

 

The report recommended that India leverage the recently signed UK FTA and negotiate EU access to overcome tariff disadvantages of over 10 per cent on inputs compared to near-zero tariffs for Vietnam and Italy, enabling deeper integration into global value chains.

 

India did not move with the times in labour-intensive sectors, the CEO said. “In leather, we have the whole value chain in India. In non-leather footwear, it begins with petroleum, then to petrochemicals, then to synthetic fabrics… These are controlled by large conglomerates, and we decided to levy duties and protect them. We have a duty disadvantage – in our effort to protect big business, we have hurt a very major labour intensive sector,” Subrahmanyam said.

 

The CEO said that Prime Minister Narendra Modi’s call for reform is to move towards self-reliance, and not self-sufficiency, and manufacturing needs to be ramped up.

 

“The good thing is, we’re in the last stages of actually launching a national manufacturing mission. It will focus on clusters and see that they have the best, world-class ecosystem,” he said.