Modi’s embrace of free trade is taking India places

by Manoj Ladwa

The US must stop trying to create WTO hurdles in the path of global growth, writes India Inc. Founder & CEO Manoj Ladwa.

The world seems to be standing on its head… well, almost. The free trade evangelists of yesterday have turned protectionist. Just look at the US under President Donald Trump. His America First agenda is actually a thinly-veiled protectionist programme that seeks to shield American companies from the competitive headwinds that they were in large measure instrumental in unleashing around the world.

Large parts of the Europe also seemed to be going the same way till the French elections threw up a thankfully middle of the road government that has eschewed the tactics that some of its more extreme parties, which many considered favourites to win, were espousing.

The UK has wavered somewhere in between. Following the Brexit vote, Theresa May’s government has made many of the right noises about embracing freer trade with the world but perceptions about her government’s immigration policy is still causing brows to furrow in many global capitals including New Delhi.

Contrast this with Narendra Modi’s concerted efforts to modernise the Indian economy in partnership with the rest of the world, including those like China with which India has a number of outstanding issues that often stand out as pain points.

India has reached out to Japan for support on various dedicated freight corridors and the Bullet Train project, to China for help on infrastructure, to Korea for consumer electronics and the West for defence platforms and high technology goods.

Then, it has extended a helping hand to India’s neighbours, the lesser developed parts of the ASEAN, the African continent, Central Asia and the nations within the Indo-Pacific region in a spirit of partnership for mutual benefit.

Modi has, in effect, extended his evocative domestic slogan of Sabka Saath Sabka Vikaas (Development for All) to the foreign policy arena in keeping with the age-old Indian tradition of Vasudeva Kutumbakam (the world is one family). His Davos speech has only amplified this refreshing approach.

Though President Trump has said the right things about India, his administration has tightened the visa regime, not only making it difficult for Indian IT companies to service their large clients in the US but also, ironically, made it that much more tough for American companies to maintain the financial viability of many of their critical operations for which Indian IT support is sine qua non.

Then, after walking out of the Paris Climate deal – a thoroughly misguided step in my opinion – the US administration is now intent upon placing roadblocks on the path to India’s march to the leadership position on renewable energy by dragging New Delhi repeatedly to the World Trade Organisation (WTO) for trying to encourage its domestic solar equipment manufacturing industry.

The irony of this action is that a US victory on this count at WTO will not really benefit American companies much. The main beneficiary is likely to be China, which accounts for 80 per cent of all solar modules used by India’s solar power producers.

Surely the world needs more global trade and not less. The unprecedented prosperity enjoyed by the US and Western Europe since the end of the Second World War was due only to one factor – free trade and the complete negation of protectionism.

Now, the very countries that benefited most from free trade seem to be turning their back to it and those, like India, that had remained suspicious of the market are embracing it enthusiastically.

Prime Minister Modi has invested great personal political capital and taken great political risks by throwing India’s doors open further to global competition. The results are showing – in the form the falling levels of poverty, growing prosperity, high growth rates, a sustained and dramatic improvement in competitiveness (as reflected in the country’s ranking on the World Bank’s Ease of Doing Business Index) and a dramatic 61 per cent increase in inflows of foreign direct investment.

This again goes to show: placing fetters on free trade will quickly become a self-defeating exercise. Modi was quick to grasp this, first as Chief Minister of the western Indian state of Gujarat and then as Prime Minister of India.

I only hope President Trump and others also quickly realise that this was what made their countries great as well.

2018-12-04T08:17:36+00:00January 23rd, 2018|2018/2017, From The Top, India Investment Journal January Edition, Year|

About the Author: Manoj Ladwa