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A file photo of foreign minister Sushma Swaraj. Photo: Sanjeev Verma/HT
A file photo of foreign minister Sushma Swaraj. Photo: Sanjeev Verma/HT

Trade targets and foreign policy

The latest FTP raises a crucial issue that has bedevilled India's trade: the lack of coordination between different economic agents, and ministries operating in silo-like structures

India’s new foreign trade policy (FTP) for 2015-20 has set a $900 billion goods and services export target. It is almost double the $465.9 billion achieved during 2013-14.

Interestingly, the policy prefaces the numerical objective with a rare pithy statement: “A vision is best achieved through measurable targets." But the fact is, most of India’s key diplomatic engagements, at bilateral, plurilateral or even multilateral levels, are defined by such targets.

Targets are ubiquitous in India’s economic diplomacy. There are many ways to judge the breadth and depth of a relationship between two countries, including cultural exchanges, defence cooperation, people-to-people interaction and historical ties. But trade and investment targets set concrete milestones against which progress can be gauged.

The target-driven approach is now spreading to bilateral ties even with smaller nations: for example, India and Vietnam recently agreed to a bilateral trade target of $15 billion, to be met by 2020.

But targets are essentially cut-and-dry, and temporal. There is no research whether targets have actually succeeded in imparting additional meaning to an existing relationship, or any conclusive evidence showing that quantifiable bounds improve the qualitative facet of an engagement.

India’s free trade agreement (FTA) with the Association of Southeast Asian Nations (Asean) is a good example. It has been a source of anxiety within government and key stakeholders. India signed the FTA for goods in 2009, but the one on services and investment, arguably India’s strong point, is yet to come into force. Even in goods trade, India suffers a chronic trade deficit with Asean.

The target for India-Asean bilateral trade, $100 billion by 2015, thus looks unattainable, especially since two-way trade (exports plus imports) amounted to only $70.5 billion during April-February 2014-15.

Consequently, India has done the next best thing: it has stretched out both the physical target as well the end-date. The India-Asean relationship will now be measured by a new target without having to necessarily address earlier performance. External affairs minister Sushma Swaraj announced the new target at the Delhi Dialogue VII inaugural session on 11 March: “…we need to make a special effort to achieve our target of enhancing trade to $100 billion by 2015, and our aspiration is to double it to $200 billion by 2022."

India has recast targets in other strategic relationships as well. During Prime Minister Narendra Modi’s first state visit to the US in September, the joint statement he issued with President Barack Obama stated: “Noting that two-way trade has increased five-fold since 2001 to nearly $100 billion, US President Obama and Prime Minister Modi committed to facilitate the actions necessary to increase trade another five-fold." In other words, to take trade to $500 billion, though the statement refrained from mentioning a target year.

When the foreign trade and investment landscape is suffused with a surfeit of targets, the next logical questions are: How are targets fixed? What is the strategy for meeting them? No one knows the answers.

For one, there is no clarity on who should set and announce targets—the commerce ministry or the external affairs ministry? While some think tanks and academic experts have been engaged by both ministries to finalize targets, the research output is not available to civil society, either for viewing or for providing inputs. Inviting public comments before finalizing targets, or even to assess the methodology used, can probably infuse some realism into these exercises.

Second, once the targets are announced, there is no detailed analysis of how these will be met, and no outlining of strategies.

Finally, the latest FTP raises a crucial issue that has bedevilled India’s trade: the lack of coordination between different economic agents, and ministries operating in silo-like structures. But, then it stops short of mentioning how Make in India or Digital India or even the smart cities policy can be integrated with the FTP to deliver higher exports of both goods and services. That remains the biggest challenge for India’s trade regime.

Rajrishi Singhal is senior geo-economics fellow at Gateway House.

Comments are welcome at otherviews@livemint.com

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