An open foreign trade policy and an open external sector have created more problems for domestic economy than it has solved.

Comment on the following statements:

(a) An open foreign trade policy and an open external sector have created more problems for domestic economy than it has solved.

Ans – The statement that an open foreign trade policy and an open external sector have created more problems for the domestic economy than it has solved is not entirely accurate. In fact, an open foreign trade policy and open external sector can provide numerous benefits for the domestic economy. However, like any economic policy, there are drawbacks and challenges that need to be addressed.

Firstly, an open foreign trade policy provides numerous benefits such as higher export earnings, increased foreign investment, and greater access to foreign technology and expertise. An open external sector means more opportunities for businesses and entrepreneurs, providing them with easier access to new markets, increasing competition, and providing greater access to skilled labor. Additionally, open trade policies provide consumers with greater access to a wider range of products and services, improving their quality of living.

However, there are challenges associated with open foreign trade policies and open external sectors. One of the challenges is that domestic businesses may not be able to compete against foreign competition. If foreign firms are able to produce goods and services at a lower cost, it could lead to the closure of domestic firms, resulting in unemployment and a potential decline in economic growth.

Another challenge is the impact on the balance of payments. An open foreign trade policy can lead to an increase in imports, leading to a deficit in the balance of payments. This deficit can have a negative impact on the exchange rate, ultimately leading to inflation and lower living standards.

Therefore, the statement that an open foreign trade policy and open external sector have created more problems for the domestic economy than it has solved is not entirely accurate. While there are challenges associated with an open foreign trade policy, the benefits of increased export earnings, foreign investment, and access to technology and expertise, as well as increased competition and access to new markets, usually outweigh these challenges.

(b) Service sector do not have any importance in India’s exports.

Ans – The assertion that the service sector does not have any importance in India's exports is not accurate. In fact, the service sector is a crucial component of India's export portfolio, contributing significantly to the country's economic growth and providing employment opportunities for millions of people.

India's service sector comprises a range of industries, including information technology services, business process outsourcing, tourism, hospitality, and financial services. These industries have become some of the fastest-growing sectors in the country, contributing significantly to India's GDP.

India's IT services sector is a particularly important contributor to the country's export earnings. According to the National Association of Software and Services Companies (NASSCOM), India's IT services exports stood at $147 billion in 2019-20, accounting for more than half of the country's total services exports.

India's tourism and hospitality sector is another important contributor to the country's export earnings. The sector has grown rapidly in recent years, with foreign tourist arrivals increasing by more than 10% annually between 2014 and 2018. In 2019, the sector generated $28.6 billion in foreign exchange earnings.

India's financial services sector is also an important part of the country's export portfolio, with the sector's exports increasing by nearly 40% over the past decade. The country has emerged as a major player in the global fintech industry, with several Indian startups offering innovative solutions to financial challenges.

Therefore, the assertion that the service sector does not have any importance in India's exports is inaccurate. The service sector is a crucial component of India's export portfolio, contributing significantly to the country's economic growth, providing employment opportunities for millions of people, and fueling India's transformation into a knowledge-based economy.

(c) The Government of India is not committed towards promoting exports and has declared the gems & jewellery sector as a less important area for export promotion.

Ans – The assertion that the Government of India is not committed towards promoting exports and has declared the gems and jewelry sector as a less important area for export promotion is not entirely accurate. The government has taken several steps to promote exports and has identified the gems and jewelry sector as one of the key sectors for export promotion.

The government has launched several initiatives to promote exports, such as the Merchandise Exports from India Scheme (MEIS) and the Services Exports from India Scheme (SEIS), which provide incentives to exporters. The government has also launched the Trade Infrastructure for Export Scheme (TIES), which provides funding for the development of export infrastructure, such as ports, airports, and roads.

In addition, the government has identified the gems and jewelry sector as one of the key sectors for export promotion. The sector is one of the largest contributors to the country's exports, accounting for over 15% of the country's total exports. The government has launched several initiatives to promote the sector, such as the Gem and Jewelry Domestic Council, which is responsible for promoting the sector both domestically and internationally.

However, it is true that the gems and jewelry sector has faced several challenges in recent years. The sector has been hit by regulatory issues, such as the Goods and Services Tax (GST), which imposed a high tax rate on the sector, making it uncompetitive in international markets. Additionally, the sector has been impacted by the pandemic, which has resulted in a decline in demand for luxury goods.

Therefore, while the assertion that the government is not committed to promoting exports is inaccurate, it is true that the gems and jewelry sector is facing several challenges that need to be addressed.

(d) India- SAARC trade relations are same as India-ASEAN trade relation.

Ans – The assertion that India-SAARC trade relations are the same as India-ASEAN trade relations is not accurate. While there are similarities between the two trade relationships, there are also significant differences that need to be considered.

The South Asian Association for Regional Cooperation (SAARC) is a regional intergovernmental organization made up of eight member states: Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. The Association of Southeast Asian Nations (ASEAN), on the other hand, is a regional intergovernmental organization made up of ten member states: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.

India's trade relations with SAARC and ASEAN member states differ significantly. India's trade with SAARC countries is relatively low compared to its trade with ASEAN countries. For example, in 2019-20, India's trade with ASEAN was valued at $98.66 billion, while its trade with SAARC was valued at $18.4 billion.

Additionally, the composition of India's trade with SAARC and ASEAN member states differs significantly. India's trade with ASEAN is dominated by manufactured goods, while its trade with SAARC countries is dominated by primary commodities, such as agricultural products and raw materials.

Finally, India's policies towards SAARC and ASEAN member states differ significantly as well. India has established a number of free trade agreements (FTAs) with ASEAN countries, such as the India-ASEAN FTA, which aims to increase trade between the two regions. However, India has not been as successful in establishing similar agreements with SAARC countries, due to political and economic challenges.

Therefore, the assertion that India-SAARC trade relations are the same as India-ASEAN trade relations is not accurate. While there are similarities between the two trade relationships, they differ significantly in terms of trade value, composition, and policy.

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