NITI Aayog Urges India to Boost Efforts in Capitalising on China +1 Strategy

The NITI Aayog has pointed out that India has had limited success in benefiting from the “China plus one” strategy, with countries in Southeast Asia, including Malaysia, Thailand, Vietnam, and Cambodia, reaping more benefits as businesses shift away from China.

Global Protectionism and Trade Challenges

NITI Aayog highlighted a growing trend of protectionism among major global players, which threatens the multilateral trading system. As countries reassess their supply chains, there is an increasing move toward nearshoring, where nations focus on growing their economies at the expense of others.

India’s Trade Prospects and Growth

NITI Aayog stressed the importance of boosting trade to meet its target of a $30 trillion GDP by 2047. However, it also raised concerns about the European Union’s Carbon Border Adjustment Mechanism (CBAM), which could create uncertainty for major export commodities like iron and steel, a sector that accounts for 23.5% of India’s exports to the EU.

Linking Economic Growth to Trade and Innovation

Vice-Chairman of NITI Aayog, Suman Bery, emphasised that economic growth is closely linked to both innovation and trade. He explained that the Current Account Deficit (CAD) reflects the gap between national savings and investments, and that a large CAD can be beneficial if there is a surplus in services.

Trade Defense and Multilateralism

Bery discussed how trade defence measures are evolving, particularly with the CBAM and potential tariffs from former U.S. President Trump. He mentioned that India needs to carefully decide whether to support multilateral trade efforts while balancing its own interests within the World Trade Organization (WTO).

The Role of Imports in Economic Competitiveness

Bery noted that imports benefit the economy by fostering competition. He warned that discouraging imports could lead to local monopolies, harming consumers. He further explained that while trade policies traditionally favour consumer interests, even the U.S. erects tariff barriers prioritising producer interests. He cautioned against limiting cheap imports, as this could hurt downstream industries and reduce competitiveness.

While he didn’t mention specific countries, Bery pointed out concerns about opaque, non-market economies that flood the market with excess goods, leading to unfair trade practices like dumping.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.