Jobs, exports and trade pacts link
Paper:
Mains: G.S. II & III Polity and Governance, Social Justice, IR and Economy
Context
- India’s economy contracted by 23.9% in the first quarter of 2020-21.
- According to the RBI, the Indian economy will further contract by 10% in the July-September quarter.
- India is in an economic recession for the first time in its independent history.
Explanation
- The average Indian feels the economic despair when her older child has lost his job or when her younger one cannot find a job despite her impressive educational qualifications.
- She sees the pall of gloom when many workshops in her town are closed or when trucks remain idle or when trains do not run or when restaurants do not have customers.
- Thousands of people lost their job due to the slowing economy in 2018-19 and 2019-20. Unemployment had reached a 45-year high.
- Then in March 2020, COVID-19 struck India and a total national lockdown was announced.
- By one estimate, more than 2 crore people lost their jobs during the lockdown. When jobs were lost incomes were also lost.
- Millions of people found that they did not have a roof over their heads or money to feed their families.
- In any country, the ultimate economic test is, are there sufficient jobs, incomes and livelihoods for all in the workforce?
- The single biggest challenge confronting India today is jobs.
- When people are poor, hungry and desperate, any job will be a blessing.
- The job that requires hard, manual work and pays the lowest daily wage is the work provided under MGNREGA scheme. During the 7th month lockdown period, there were 11 crore people who asked for work under MGNREGA. That is 20 times more than the total number of persons employed by all the companies listed on the stock exchange.
- The only meaningful conversation about the economy that we can have is how to recover the jobs that were lost and create new well-paying jobs.
- According to Economic Survey 2016-17, if govt. makes available Rs 10 lakh as a loan to four companies. The steel manufacturing company will create one new job. An automobile manufacturer will create three new jobs. A producer of leather goods will create 70 new jobs. An apparel and garment maker will create 240 new jobs.
- Large number of good quality jobs can be created only in sectors that are labour intensive, and where India has a comparative advantage, such as apparel, leather goods, value-added agricultural products.
- These job creating sectors depend not only on the domestic market but, also on export markets. India, therefore, needs to find more export markets, nurture them and sustain them amid intense global competition.
- Merchandise exports also create supporting jobs in warehousing, transport, container stations, shipping, etc.
- Thus, it is very important to encourage and incentivise exports to be able to create many new jobs in the country. Exports were the most significant factor that drove the Indian economy in the boom years of 2003-2012.
- India was the 3rd fastest growing exporter of manufactured goods in this period after Vietnam and China.
- New Trade Policy unveiled in 1991-92 and taken forward by every govt has paid rich economic dividends, in generating jobs, incomes and consumption.
- Despite the Make in India hype, export volumes have lowered in the last 6 years. The reason for this other than the disruption of export supply chains is the complete reversal in the direction of India’s foreign trade policy with higher tariffs, non tariff barriers, quantitative limits and the appreciation of the value of the rupee.
- Countries of the world invested in a rule based trading order. The age of trade agreements – bilateral and multilateral – was born. There were more winners than losers because of trade agreements.
- Some historic trade agreements were the ASEAN, NAFTA and the MERCOSUR. Half-hearted and hesitant agreements like the SAFTA failed.
- Exports are linked to trade agreements. The member countries of a trade agreement promote trade among themselves with easy rules and restrict trade with non members with hard rules.
- FTA provisions were also misused by some countries to question the foreign investment policies and tax policies of other countries, usually recipients of FDI like India.
- Trade and commercial disputes were dragged to international arbitral tribunals in the pretext of violating FTA provisions.
- Manmohan Singh, in his doctoral thesis at Oxford University, pleaded for India to shed it’s export pessimism.
- Today, we need to shed exaggerated fears of trade agreements. India cannot protect it’s domestic industry with high trade barriers while aspiring for bilateral trade treaties to promote exports.
- We must re-learn to engage with other countries and negotiate favourable trade agreements through bilateral and multilateral routes. The art of survival in a fiercely competitive world is engagement and negotiation.
- India has the immediate opportunity to export goods worth $60 billion in labour intensive sectors which can create lakhs of new jobs.
- To revive exports, India needs greater and frictionless access to global markets.