[Answered] Highlight the factors hindering India’s global trade potential. Also suggest some alternative policy measures to boost global trade of India.

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Introduction: Contextual introduction.
Body: Write some factors hindering India’s global trade potential. Also suggest some policy measures to boost global trade of India.
Conclusion: Write a way forward.

India has specialised in sectors which will likely be in high demand in the near future (e.g. information technology and communication (ITC) services, pharmaceuticals and medical devices). India’s diaspora (the largest in the world) has helped develop trade networks while migrants’ remittances and savings have supported domestic consumption and investment.


  • Inadequate infrastructure: India’s major ports and roads have a serious congestion problem. This might be due to infrastructural deficiencies such as equipment shortages, outdated navigational aids, lack of technical expertise, etc.
  • Low credit access: MSMEs account for close to 50 % of India’s total exports. Formal financial institutions such as banks are reluctant to lend to MSMEs due to their lack of adequate collateral.
  • High cost of finance: Banks and lenders pay a high price to comply with various financial security rules such as Know Your Customer (KYC) etc. and heavy documentation process.
  • Trade barriers: Average import duty rates in India are higher than in most developed and emerging economies.
  • The over reliance of India on service sector proved costly as it impacted its capacity building in manufacturing. This also impacted India’s competence in global exports and trade.

Measures to boost global trade:

  • Reduce turnaround time: Reducing the time it takes cargo to enter and leave India’s ports is critical to easing the export process and hence significant to global trade.
  • Improve connectivity: Modernising existing ports and building is crucial for better connectivity between manufacturing centres and export hubs.
  • Easy credit access: There is a need to open up alternate credit avenues, such as finance technology start-ups, and create a single-window system. So that all applications, documentation and clearances, can be resolved at a single point. This would save both time and money while availing of credit.
  • Cutting tariffs: India’s policy of charging high import tariffs to protect domestic industries is counter-productive. Not only does it make local manufacturers less competitive, it harms the prospects of exporters who require imported inputs.
  • Digitisation and e-commerce: by including e-commerce export platforms under Niryat Bandhu scheme, establishing e-commerce export promotion cells and establishing e-Commerce Export Zones to promote MSMEs.

International trade is critical to a country’s economy, as it is in charge of enabling both growth and economic development that is not limited to a single country. India aspires to be a $5-trillion economy by 2025. To achieve this dream, it needs to increase its share in global trade.

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