India Can Become High-Income Country with Greater Trade Openness: World Bank

 Chennai: Greater trade openness can be the catalyst to achieve India’s ambitious goal of becoming a high-income country by 2047. India’s trade agreements with the EU, UK, Canada, and New Zealand can more than double India’s access to global markets, finds the World Bank.

India has set a goal of becoming a high-income country by 2047. But reaching this goal will require India to grow almost 8 per cent on average for the next 22 years. That would mean an acceleration from the 6.6 per cent growth per year that India achieved over the last 25 years.

Amid global convulsions, opening to international trade can become the catalyst that India needs to achieve its development goal, finds the World Bank

India relies on services exports, especially business services, which have not been subject to the recent tariff tensions. While the average emerging market and developing economy’s (EMDE) exports consist of about 80 per cent goods, India’s exports consist of more than 40 per cent services.

India’s goods exports are highly diversified across destinations as well as sectors. More than half of India’s goods exports are shipped to other EMDEs such as the United Arab Emirates, Saudi Arabia, and Türkiye. India’s top four export sectors—refined oil, pharmaceuticals, metals, and textiles—account for only 30 per cent of goods exports. India’s export diversification also makes the country more resilient against geopolitical shocks.

India has to lower import tariffs and ease restrictions on FDI. Such measures are often implemented in the context of free trade agreements. India currently has a few bilateral agreements. These are mostly with small partner countries that currently only account for 16 per cent of global GDP.

Once India’s trade agreements with the EU, UK, Canada, and New Zealand are completed, they could more than double India’s access to global markets. Even better would be deeper trade agreements that also cover services, especially digital services. Trade agreements that incorporate digital provisions could increase the benefit for India’s main export specialization in business services.

India, like most other South Asian countries, has struggled with a declining employment-to-working age population ratio over the past decade and female labour force participation that is well below the EMDE average. Greater trade openness is associated with higher long-term employment ratios and more employment opportunities for women.

One of the most momentous overhauls of India’s policy architecture took place in the 1990s, with dramatic and lasting positive effects. Indian policymakers are indicating readiness to make bold changes once again.