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Day 49 – Q 1.With much of the developed world adopting an inward looking economic policy, there are challenges to India’s economic diplomacy that need immediate attention. Elucidate.

1. With much of the developed world adopting an inward looking economic policy, there are challenges to India’s economic diplomacy that need immediate attention. Elucidate. 

अधिकतर विकसित देशों द्वारा एक अंतर्मुखी आर्थिक नीति को अपनाने से भारत की आर्थिक कूटनीति के सम्मुख कई चुनौतियां पैदा हो गई हैं, जिन पर तत्काल ध्यान देने की आवश्यकता है। स्पष्ट करें।


According to the Economic Survey, the world is facing Hyper globalization repudiation in which western countries have reached its political capacities for globalization. There is a rising tendency of protectionism across the world, especially the developed countries like US, Japan, China, UK and EU. 


Backtracking from trade liberalization is not new. Global Trade Alert (GTA) data reveals a significant reversal in trade liberalization since the global financial crisis of 2008, and especially since 2011.

In an inward-looking economic policy, protecting domestic industries against the foreign competition through tariffs, subsidies, import quotas, or other restrictions or handicaps placed on the imports of foreign competitors. The objective of trade protectionism is to protect a nation’s vital economic interests such as its key industries, commodities, and employment of workers. 

Concerns about global trade hostilities getting prolonged have escalated lately in the context of the recent measures taken by the US. The Donald Trump administration has imposed tariff hikes on steel and aluminium, triggering retaliatory actions by China.

A challenge to India’s economic:

Inward looking policies of the developed world and protectionism are such that the developing countries like India have a reason for considerable concern about the state of commercial policy.

  • Reduced export of IT services to the US due to the H1B visa issue.
  • Curb on fruit and vegetable exports to Europe due to Sanitary and phytosanitary reasons.
  • The dominance of developed nations in international platforms such as WTO and UN.
  • An environment of restrictive global trade has an adverse impact on profit growth of Indian companies. Higher import tariffs can have a negative impact on earnings, by increasing the cost of inputs.
  • Openness will lead to a drop in sales growth of Indian companies. While trade openness benefits Indian companies, reduction in import tariff hurts them on the demand front because of competition from imports.
  • There has been increasing pressure on India to cut tariffs and dilute export incentives.

Way Forward:

  • Increase in tariff rate to improve the performance of selected sectors. 
  • Use ASEAN and BIMSTEC like regional platforms to negotiate with developed countries.
  • Advocate for a more democratic process of WTO.
  • With massive trade surpluses in India’s favour, it should offer greater market access to the neighbourhood by reducing tariff and non-tariff barriers.
  • Before opening up its markets to the outside world, India should go for a controlled manner bilateral free trade arrangements and give Indian industry time and space to compete in markets around the world in the coming years.
  • India, with the world’s single largest cohort of young workers, should be a major beneficiary of ageing populations in industrialized nations. For India, securing international worker mobility is an important objective since domestic opportunities alone might not fully optimize India’s workforce, and remittances from expatriate workers are a major source of much needed foreign exchange.
  • With increasing protectionist trends and appetite for overarching trade deals getting lower, traditional trade negotiations might need to be replaced with specific bilateral solutions; which will be product and country-specific.


Inward looking policies did generate some short term benefits, such as the protection of infant and declining industries; job creation; increased income and preserving traditional ways of life. However, the consensus is that the challenges of globalisation require a more outward-looking approach. 

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