India's bane is its non-competitiveness

11 Dec 2019

Growing imports of consumer goods, thermal power plants, solar panels and exports of primary products like iron ore and cotton constitute India's trade with China. All that is imported was being made, and can be made in India. Globally, there is stagnant demand in the West, excess, competitive manufacturing capacity in China and a huge growing demand in India. The logic of free trade is for India's growing demand to be met by China's excess capacity and India's inefficient, non-competitive capacities to close down without need for creation of new capacity. This has been happening. Joining the RCEP would only accelerate the process. This may be a major factor in the structural nature of the present severe economic downturn. India needs to take a hard look at its choices. Creating global competitiveness and doing all that it takes to do so, including abandoning conventional ways of thinking, cannot be delayed. Better-functioning factor markets and reducing costs for businesses are overdue. Smarter, creative policies for developing and nurturing the nation's industrial and technological capacities need to be crafted.

Tags
International trade
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